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A. The Duty of Consistency
The duty of consistency, sometimes referred to as quasi-
estoppel, is an equitable doctrine that Federal courts
historically have applied in appropriate cases to prevent unfair
tax gamesmanship. Kielmar v. Commissioner, 884 F.2d 959, 965
(7th Cir. 1989), affg. Glass v. Commissioner, 87 T.C. 1087
(1986); Cluck v. Commissioner, 105 T.C. 324 (1995); LeFever v.
Commissioner, 103 T.C. 525 (1994), affd. 100 F.3d 778 (10th Cir.
1996). The duty of consistency doctrine “is based on the theory
that the taxpayer owes the Commissioner the duty to be consistent
in the tax treatment of items and will not be permitted to
benefit from the taxpayer’s own prior error or omission.” Cluck
v. Commissioner, supra at 331. It prevents a taxpayer from
taking one position on one tax return and a contrary position on
a subsequent return after the limitations period has run for the
earlier year, if such contrary position would harm the
Commissioner. Id.
This case is appealable to the Court of Appeals for the
Seventh Circuit. In Kielmar v. Commissioner, supra at 965, the
Court of Appeals for the Seventh Circuit held that a taxpayer is
placed under a duty of consistency when there has been: (1) A
representation or report by the taxpayer; (2) on which the
Commission has relied; and (3) an attempt by the taxpayer after
the period of limitations has run to change the previous
representation or to recharacterize the situation in such a way
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