Patrick E. Catalano - Page 15

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               In his reply brief, petitioner further invokes the doctrine            
          of equitable recoupment as a basis for the relief he seeks.  The            
          doctrine of equitable recoupment applies if “‘a single                      
          transaction constitutes the taxable event claimed upon and the              
          one considered in recoupment.’  The single transaction must also            
          be subject to two taxes based on inconsistent legal theories.”              
          Parker v. United States, 110 F.3d 678, 683 (9th Cir. 1997); Kolom           
          v. United States, 791 F.2d 762, 767 (9th Cir. 1986).                        
               Assuming, without deciding, that we have jurisdiction to               
          apply the doctrine and that it was properly raised by petitioner,           
          petitioner's situation fails to qualify for equitable recoupment.           
          Although a “single transaction”--the lease of boats--is involved,           
          petitioner participates in that transaction in two capacities:              
          as lessor/payee and as sole shareholder of the lessee/payor, due            
          to the separate recognition of the corporate entity.  The taxes             
          he pays in each capacity are not based on “inconsistent                     
          theories”.  The disallowance to the payor of a deduction is not             
          inconsistent with the payee's receipt of income in respect of the           
          same payment.                                                               
               In the final analysis, there is no reason to reduce                    
          petitioner's income by the amount he reported from leasing his              
          boats to his corporation.  The fact that petitioner misconstrued            
          the tax effects of doing business both individually and through a           
          corporation does not provide a basis to ignore the tax                      

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