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The factual frame of reference herein is: (1) petitioner
took a CLD of $321,002 on his 1987 return; (2) upon the audit of
that return, respondent disallowed the deduction but did not
determine a deficiency for that year because respondent removed
$360,000 of income included in that return on the ground that it
was properly includable in income for 1986; (3) by virtue of our
decision in Hagestad v. Commissioner, supra, respondent's
position as to the includability of the $360,000 in income was
rejected, and petitioner's position that it was properly reported
in 1987 was sustained; (4) as a result of the expiration of the
3-year period of limitations in respect of 1987, the effect of
the foregoing events was to leave petitioner's 1987 return
accepted as filed, thereby giving petitioner the full benefit of
the CLD which respondent had disallowed on audit; (5) petitioner,
based upon respondent's disallowance of the CLD for 1987 and the
suspension provisions of section 465(a)(2), applied a portion of
that deduction in an amended return for 1991 and received a
refund in 1995.
The question before us is whether, under the foregoing
circumstances, respondent can obtain the benefit of the
mitigation provisions.
Respondent contends that petitioner received the benefit of
a CLD of $321,002 in 1987, and then again (to the extent of
$171,318) in 1991 (by virtue of the 1995 refund), and that this
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