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employees intending to compensate them for their personal
services.17
Finally, respondent urges this Court to exercise its
discretion to hold petitioner to a “duty of consistency” and not
allow it to recharacterize the allowances as compensation. In
LeFever v. Commissioner, 103 T.C. 525, 541 (1994), affd. 100 F.3d
778 (10th Cir. 1996), this Court addressed the equitable doctrine
of the duty of consistency:
The “duty of consistency” is based on the theory that
the taxpayer owes the Commissioner the duty to be
consistent with his tax treatment of items and will not
be permitted to benefit from his own prior error or
omission. The duty of consistency doctrine prevents a
taxpayer from taking one position one year and a
contrary position in a later year after the limitations
period has run on the first year. [Citations
omitted.][18]
17It should be noted that the relevant statutes and
regulations have been clarified since the years in issue with
respect to the tax treatment of per diem allowances. Under
current law, per diem allowances are paid under either an
“accountable” plan or a “nonaccountable” plan, and the tax
consequences differ depending on which plan the allowances are
paid under. For discussions of accountable and nonaccountable
plans, see Trucks, Inc. v. United States, 234 F.3d 1340 (11th
Cir. 2000), Brenner v. Commissioner, T.C. Memo. 2001-127, and
United States v. Armstrong, 974 F. Supp. 528 (E.D. Va. 1997).
18See Hughes & Luce, L.L.P. v. Commissioner, T.C. Memo.
1994-559, affd. on other grounds 70 F.3d 16 (5th Cir. 1995),
wherein we outlined the following requirements for application of
the duty of consistency:
(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
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