Duty of Consistency Doctrine - By John R. Bullis

1. There is a representation or report (tax return) by the taxpayer

2. IRS relied on the representation or report

3. After the statute of limitations has run, the taxpayer attempts to change the previous representation in such a way as to harm IRS. If all three elements are present, IRS may act as if the previous representation on which they relied continues to be true, even if it is not true. The taxpayers admitted they filed 2008 return and IRS relied on it and allowed the statute of limitations to close on 2008 corporation and individual returns.  But they said it would not be consistent with their previous reporting to include the $1.6 million received in 2008 to be taxed in 2009.  The Court held PBS was bound by the duty of consistency doctrine, IRS won that case. Did you hear “In order to succeed you must fail, so you know what not to do next time”.