Cleo Perfume, Inc. - Page 13

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          1993, by $1,860,621--the exact amount of the erroneous adjustment           
          Mr. Rosales made in the year ended June 30, 1991.)                          
               C.  Duty of Consistency                                                
               The duty of consistency (also known as the doctrine of quasi-          
          estoppel) prevents a party from benefiting in a subsequent year             
          from an error that was made in a prior year.  See Southern Pac.             
          Transp. Co. v. Commissioner, 75 T.C. 497, 559-560 (1980).  When the         
          duty of consistency applies, the taxpayer must recognize income             
          even though the earlier deduction was improper.  Id. at 560.                
               The duty of consistency applies when:  (1) The taxpayer made           
          a representation or reported an item for Federal income tax                 
          purposes in one year, (2) the Commissioner acquiesced in or relied          
          on that representation or report for that year, and (3) the                 
          taxpayer attempts to change that representation or report in a              
          subsequent year, after the period of limitations has expired with           
          respect to the year of the representation or report, and the change         
          is detrimental to the Commissioner.  Herrington v. Commissioner,            
          854 F.2d 755, 758 (5th Cir. 1988), affg. Glass v. Commissioner, 87          
          T.C. 1087 (1986).  When the duty of consistency applies, the                
          Commissioner may proceed as if the representation or report on              
          which the Commissioner relied continues to be true, although in             
          fact it is not.  The taxpayer is estopped from taking a position to         
          the contrary.  Herrington v. Commissioner, supra.                           

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