Opinion ID: 259355
Heading Depth: 1
Heading Rank: 4

Heading: Inconsistent Position

Text: 48 The district court found that the Commissioner had maintained an inconsistent position. The facts support this finding. 49 The ending inventory for the year 1948 was first found by the Commissioner on November 2, 1951, to be $443,470.50, then after the statute barred the year 1948 the Commissioner found on May 1, 1954, the same ending inventory for 1948 to be $328,972.04. Similarly, the Commissioner found on November 2, 1951, that ending inventory for the year 1949 was $465,334.40, then after the statute barred the year 1949 the Commissioner found on May 1, 1954, the same ending inventory for 1949 to be $340,507.92. In addition, the Commissioner on May 1, 1954, projected this changed position to all open years through the year 1952. The Commissioner argues that the inconsistency does not apply, because both positions of the Commissioner relate to the same years 1948 and 1949 and that 3801 requires inconsistency between the open years of determination and the closed year in which the item was erroneously included in income. But the effects flowed to an open year. It is fundamental that to change closing inventory of 1948 and 1949 also changes the beginning inventory for 1950 (an open year) and any later year similarly changed (here 1950 through 1952). Thus, in Gooch, the court held that [t]he reduction made by the Commissioner in the closing inventory for 1935 automatically decreased the opening inventory for the fiscal year 1936, and had the effect of shifting the amount of this decrease to gross income for 1936. In so doing, 50 [t]he Commissioner acted inconsistently. In his determination of May 7, 1940, with respect to the fiscal year 1936, the Commissioner adopted a position which was inconsistent with the position the taxpayer had maintained with respect to the erroneous inclusion of `option wheat' in its inventories, and which determination was also inconsistent with the basis on which the Commissioner had audited and closed the plaintiff's returns for years prior to the fiscal years 1935 and 1936.    When the determination made in May 1940, became final, `the correction of the effect of the error,' made in years prior to the fiscal year 1936, was prevented by the operation of the provisions of the statute of limitations. 78 F. Supp. at 100-101. 51 See also H. T. Hackney Co. v. United States, 1948, 78 F.Supp. 101, 111 Ct.Cl. 664 and Moultrie Cotton Mills v. United States, 1957, 151 F.Supp. 482, 138 Ct. Cl. 208.