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The fact the disallowance did not result in the
imposition or collection of any additional tax is not
relevant.
Respondent contends to the contrary, and we agree, that it is
very relevant.
Petitioner confuses the legal question of whether or not the
CLD's were allowable or should have been allowed with the factual
question of whether or not they were actually allowed.3 For this
reason, we see no need to decide whether the 1992 stipulation
would apply to the CLD originally allocated to the 1987 taxable
year, as this would only help determine whether the deduction at
issue was allowable, not whether it was actually allowed.
With respect to petitioner's 1987 taxable year, petitioner
filed a return reporting a certain amount of income, which he
reduced by a certain amount of CLD. He then paid tax on this
lower amount of net income. Regardless of respondent's various
positions during the dispute and litigation, the amount of tax
petitioner paid for 1987 never changed, and was never different
from the amount he reported on his 1987 return.
3 For example, petitioner argues that respondent's
decision, through Revenue Agent Valenzuela, to grant petitioner's
1995 refund, was necessarily based on the conclusion that the
CLD's were not allowed in 1987. We, however, think respondent's
actions could just as well have been based on a conclusion that
the deductions should not have been allowed, and that the proper
action at the later date was to allow the refunds based on the
carryforwards, and then to press for correction of the original
mistake using the mitigation provisions. See Kenosha Auto
Transport Corp. v. Commissioner, 28 T.C. 421, 425 (1957).
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