-39-
Under these circumstances, we conclude that petitioner's
reliance upon Vecchio is misplaced.
III. Respondent's Prior Activities Do Not Require a Different
Result
Petitioner argues that respondent accepted its partnership
allocations and capital account entries prior to 1991. Petitioner
asserts that this acquiescence underscores the strength of its
argument that THEI should be allocated all the net income for the
period following June 20, 1991. We disagree. In general, the fact
that a taxpayer's treatment of an item on a tax return in a prior
year is accepted by the Commissioner's agents in audits of the
taxpayer's prior return does not preclude or estop the
Commissioner, in a later year, from determining that an item should
be treated differently. See Hawkins v. Commissioner, 713 F.2d 347,
351-352 (8th Cir. 1983), affg. T.C. Memo. 1982-451; Easter v.
Commissioner, 338 F.2d 968 (4th Cir. 1964), affg. per curiam T.C.
Memo. 1964-58; Estate of Emerson v. Commissioner, 67 T.C. 612, 617-
618 (1977); Coors v. Commissioner, 60 T.C. 368, 406 (1973), affd.
519 F.2d 1280 (10th Cir. 1975).
(...continued)
that a liquidation of PGL and PLH would provide adequate cash to
pay off THEI's negative capital account, repay Mr. Manchester's
positive capital account, and leave a surplus of cash to be
allocated pursuant to the 85-to-15 ratio specified in the IHCL
Restated Agreement. These schedules leave us with many
unanswered questions, especially with regard to the extremely
large negative capital account balances of PGL and PLH.
Petitioner's presentation of this argument has failed to convince
us that upon liquidation of IHCL, THEI would have completely
restored its negative capital account.
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