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$13,790.69, because respondent’s agent made the error and because
petitioner is suffering economic hardship. Essentially,
petitioner argues that the doctrine of equitable estoppel should
apply against respondent.
“Equitable estoppel is a judicial doctrine that ‘precludes a
party from denying his own acts or representations which induced
another to act to his detriment.’” Hofstetter v. Commissioner,
98 T.C. 695, 700 (1992) (quoting Graff v. Commissioner, 74 T.C.
743, 761 (1980), affd. 673 F.2d 784 (5th Cir. 1982)). It is well
settled, however, that equitable estoppel does not bar or prevent
the Commissioner from correcting a mistake of law, even where a
taxpayer may have relied to his detriment on that mistake. Dixon
v. United States, 381 U.S. 68, 72-73 (1965); Auto. Club of Mich.
v. Commissioner, 353 U.S. 180, 183 (1957); see also Schuster v.
Commissioner, 312 F.2d 311, 317 (9th Cir. 1962), affg. in part
and revg. in part 32 T.C. 998 (1959); Zuanich v. Commissioner, 77
T.C. 428, 432-433 (1981). An exception exists only in the rare
case where a taxpayer can prove he or she would suffer an
unconscionable injury because of that reliance. Manocchio v.
Commissioner, 78 T.C. 989, 1001 (1982), affd. 710 F.2d 1400 (9th
Cir. 1983). Moreover, equitable estoppel is applied “against the
Government with utmost caution and restraint”. Schuster v.
Commissioner, supra at 317.
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