Michael C. Hollen and Joan L. Hollen - Page 13




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          held individually until after the period of limitations had run.            
          This defense is without merit because the duty of consistency               
          applies equally to a taxpayer who innocently misrepresents a fact           
          in a time-barred year and one who misleads intentionally.  See              
          Beltzer v. United States, supra at 212; Unvert v. Commissioner,             
          72 T.C. 807, 816 (1979), affd. 656 F.2d 483 (9th Cir. 1981).8               
               Petitioners also argue that the duty of consistency does not           
          apply because whether they own a property interest for Federal              
          tax purposes is controlled by State law.9  We reject this                   
          argument.  Determining whether the ranch was owned by the                   


               8In Demirjian v. Commissioner, 54 T.C. 1691, 1696 (1971),              
          affd. 457 F.2d 1 (3d Cir. 1972), a case presenting similar facts,           
          we rejected the taxpayers’ arguments using a burden of proof                
          analysis.  The taxpayers in Demirjian, like the taxpayers in this           
          case, claimed that they held title to certain real property as              
          tenants in common rather than as partners.  They had filed                  
          partnership tax returns and various correspondence which                    
          represented that the partnership owned the real property.                   
          Although we did not apply the duty of consistency to resolve the            
          case, we analyzed the applicable burden of proof and concluded              
          that the taxpayers had failed to demonstrate that the property in           
          question was not partnership property.  We held that “the record            
          shows that * * * [the taxpayers] intended to and in fact did                
          carry on their prior corporate venture in partnership form, and             
          that they operated the business property conveyed to them as                
          partners.  Petitioners have failed to prove otherwise.”  Id. at             
          1697-1698.  Here, too, the taxpayers “have failed to prove                  
          otherwise.”  Id. at 1698; see also McManus v. Commissioner, 583             
          F.2d 443 (9th Cir. 1978) (a taxpayer is estopped from denying               
          that real property is partnership property even though the                  
          property is held as a tenancy in common), affg. 65 T.C. 197                 
          (1975); Smith v. Commissioner, T.C. Memo. 1978-416 (land was                
          partnership property despite the fact that legal title to the               
          land was held as a tenancy in common).                                      
               9Petitioners alleged on brief that the partnership is a                
          California partnership and that California law applies.                     





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