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If a contract is based on a mutual mistake, a defense to
reformation or rescission is not that the contract with the
mistake is more beneficial to the defending party. Similarly, it
is no defense to petitioner's motion for respondent to decide
that the outcome of the case with the stipulation based on a
mutual mistake is more favorable to respondent than the outcome
petitioner proposes.
Respondent cannot claim prejudice by petitioner's proposed
treatment of the interim interest, respondent having included the
ITC amounts in question in the 1992 computations, Dorchester
Indus. Inc. v. Commissioner, supra, and petitioner having raised
the issue with respondent shortly after discovering the error.
See 13 Williston, Contracts, sec. 1578, at 507 n.5 (3d ed. 1970).
Finally, as we discuss below, while it is uncontested that
the 1994 computations correctly reflect payments so as to
determine tax liability for the deficiencies, they do not
correctly reflect payments so as to determine the proper interest
liability. According to respondent, if a change of heart takes
place, that is enough to eliminate the existence of a mutual
mistake even though in point of fact the change of heart proves
to be incorrect. Respondent is in effect saying that, even if
petitioner's contention as to the substantive law is correct,
respondent's changed position remains unassailable. We think
respondent's position creates a catch-22 situation and is
incongruous to say the least.
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