- 15 -
as to the year in which * * * deductions belong * * * should
never result in * * * a double reduction of tax". S. Rept.
1567, supra, 1939-1 C.B. (Part 2) at 815. Because we hold that
the CLD was "allowed" in 1987 for the purposes of sections 1311
and 1312, we find that there was a double deduction and that
petitioner did maintain an inconsistent position with respect to
the CLD. Thus, the third and fourth elements enunciated in Fruit
of the Loom, Inc. v. Commissioner, supra, have been met.
Accordingly, we conclude that the mitigation provisions are
applicable and operate to lift the time bar of section 6501.
The mitigation provisions, once applicable, do not allow
respondent to re-examine the barred year de novo, but rather,
merely allow an adjustment to the extent of the inconsistency.
Secs. 1311(a), 1314; sec. 1.1314(a)-1(c), Income Tax Regs.; see
4 Bittker & Lokken, Federal Taxation of Income, Estates and Gifts
par. 113.9.5 at 113-34 (2d ed. 1992). In this case, respondent
may adjust petitioner's 1987 income by the amount of the CLD
taken in 1987 and carried forward to 1991, agreed to by the
parties to be $171,318.
Additions to Tax
Petitioner concedes that, were we to find the mitigation
provisions applicable, any resulting underpayment in tax was due
to a tax-motivated transaction as described in section 6621(c).
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