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expenses on their separate returns. In such circumstances,
respondent was fully entitled to defend against inconsistent
results by holding both parties to the transaction liable for the
deficiency. See Powell v. Commissioner, 91 T.C. 673, 679 (1988)
("We recognize that respondent must take alternative or
inconsistent positions at times to protect the revenue, but * * *
[respondent] may not take such a position without good cause."),
revd. on other grounds 891 F.2d 1167 (5th Cir. 1990); Estate of
Dooley v. Commissioner, T.C. Memo. 1992-557; Moore v.
Commissioner, T.C. Memo. 1989-306.
In addition, where, as here, the evidence in a case consists
of the testimony of persons who have maintained inconsistent
positions in prior proceedings, respondent also is entitled to
maintain inconsistent positions with respect to those parties
until this Court can hear the evidence and determine the
credibility of the witnesses and the weight to be given their
testimony. See Smith v. Commissioner, T.C. Memo. 1990-430; see
also DeVenney v. Commissioner, 85 T.C. at 930; Boyle v.
Commissioner, T.C. Memo. 1995-74; Creske v. Commissioner, T.C.
Memo. 1990-318, affd. 946 F.2d 43 (7th Cir. 1991); Porter v.
Commissioner, T.C. Memo. 1986-465.
In the instant case, in the absence of a settlement, the
deductibility of expenses would have hinged on whose testimony
the Court found credible. Thus, we conclude that petitioner has
failed to prove that there was not good cause for respondent's
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