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taxpayer”, especially if “the crucial facts are known to both
parties and the erroneous deductions are due to a mutual mistake
of law.” S. Pac. Transp. Co. v. Commissioner, supra at 560; cf.
Interlochen Co. v. Commissioner, 232 F.2d 873 (4th Cir. 1956),
affg. 24 T.C. 1000 (1955); Hull v. Commissioner, 87 F.2d 260, 262
(4th Cir. 1937) (stating that “a party either knowing the facts,
or in a position to know them, cannot claim the benefit of
estoppel”), revg. 33 B.T.A. 178 (1935). In the instant case,
respondent had reason to know all the relevant facts. When Mr.
Posner’s estate filed its estate tax return, it adequately
disclosed the relevant facts and documents, attaching a copy of
Mr. Posner’s will.15 Respondent audited the estate tax return of
Mr. Posner’s estate and allowed the marital deduction.16
15 Respondent claims that when Mr. Posner’s estate filed the
estate tax return, it made a “factual representation” that
decedent possessed a general power of appointment over the
marital trust property. We are not convinced that this is a
factual representation; rather, it is a legal conclusion. In
attaching Mr. Posner’s will to the estate tax return, Mr.
Posner’s estate disclosed all underlying facts necessary to reach
this conclusion or an alternative conclusion. Cf. Estate of
Ashman v. Commissioner, T.C. Memo. 1998-145 (“The Commissioner
may rely on representations in a return signed under penalties of
perjury absent sufficient facts that provide actual or
constructive knowledge to the contrary.” (Emphasis added.)),
affd. 231 F.3d 541 (9th Cir. 2000).
16 Cf. Estate of Letts v. Commissioner, supra at 300 (“The
Commissioner acquiesces in or relies on a fact if a taxpayer
files a return that contains an inadequately disclosed item of
which the Commissioner was not otherwise aware, the Commissioner
accepts that return, and the time to assess tax expires without
an audit of that return.” (Emphasis added.)).
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