From time to time a corporation or its advisers will consider taking a position on an income tax return which is advantageous in the year for which returns are being prepared but inconsistent with a position taken on a return for a prior year, perhaps a year with respect to which the statute of limitations period for assessment of additional tax has run. Even where it is reasonably clear that the earlier position was erroneous, the IRS has a powerful argument against the inconsistent position in the later year, namely, the so-called “duty of consistency.”

The duty of consistency is described in the recent Tax Court decision of Belmont Interests v. Commissioner (TC Memo 2022-60), discussed below, as an equitable doctrine, also sometimes referred to as quasi-estoppel, that “prevents taxpayers from benefiting from their own prior errors or omissions. In particular, ‘[t]he 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’” (citation omitted).

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