                        T.C. Memo. 2000-343



                      UNITED STATES TAX COURT



          PAUL D. AND JOYCE E. KRAUSE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 12457-99.             Filed November 8, 2000.


     Paul D. Krause, pro se.

     Ann M. Welhaf, for respondent.



                        MEMORANDUM OPINION


     COUVILLION, Special Trial Judge:     Respondent determined a

deficiency of $6,974 in petitioners' 1994 Federal income tax and

an addition to tax under section 6651(a)(1) of $286.1

     Respondent conceded the addition to tax under section

6651(a)(1).   Petitioners conceded all other adjustments in the


     1
          Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for the year at issue.
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notice of deficiency.    The sole issue for decision is whether

petitioners are entitled to report gain realized from the sale of

real estate under the installment method pursuant to section 453

when petitioners, on their 1994 income tax return, reported the

gain in full as a completed sale.

     Some of the facts were stipulated.    Those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference.    At the time the petition was filed, petitioners'

legal residence was Albuquerque, New Mexico.

     During 1994, petitioners sold three real estate properties,

the consideration for which was to be paid to them for a period

or periods extending beyond the year of sale.    The parties

stipulated that these properties were sold "under an installment

method".   On their Federal income tax return for 1994,

petitioners reported the sales on a Schedule D, Capital Gains and

Losses, as long-term capital gains.     Their tax liability for 1994

was based upon the entire gain realized from the sales of their

properties.    Respondent determined that petitioners underreported

the gain realized from one of the properties, and petitioners

have conceded that determination, as noted above.    Petitioners

chose to include the entire gains realized from the sales of

their real estate properties on their 1994 return because they

had incurred and claimed a section 179 expense during 1994 of

$17,500 that would substantially offset or mitigate the tax on
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the gains realized from their real estate sales.      Respondent,

however, determined in the notice of deficiency that petitioners

were not entitled to a section 179 expense deduction and,

therefore, disallowed that expense.      Petitioners conceded that

adjustment and now seek the benefit of section 453 to have their

real estate gains taxed under the installment method.      Respondent

challenges their right to do so.

     Section 453 provides that income from an installment sale is

accounted for under the installment method.      See Bolton v.

Commissioner, 92 T.C. 303, 305 (1989).      An installment sale is

defined as a disposition of property where at least one payment

is to be received after the close of the taxable year in which

the disposition occurs.   See sec. 453(b)(1).     Income from an

installment sale is automatically to be taken into account as

installment income under section 453 unless the taxpayer elects

not to have the method apply.    See sec. 453(a), (d); Bolton v.

Commissioner, supra at 306.     Generally, an election by the

taxpayer not to report a disposition of property on the

installment method is made by the due date of the taxpayer's

return for the year in which the disposition occurs and in the

manner prescribed by the appropriate tax forms for that return.

See Bolton v. Commissioner, supra; sec. 15A.453-1T(d)(3),

Temporary Income Tax Regs., 46 Fed. Reg. 10718 (Feb. 4, 1981).

Specifically, a taxpayer who reports an amount realized which
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equals the selling price and includes the full face amount of any

installment obligations received in connection with the sale is

considered to have made an effective election that the

installment sales provisions of section 453 are not applicable.

See sec. 15A.453-1T(d)(3)(i), Temporary Income Tax Regs., supra.

Generally, such an election is irrevocable and may only be

revoked with the Secretary's permission.     See sec. 15A.453-

1T(d)(4), Temporary Income Tax Regs., supra.     Here, petitioners

never applied to the Commissioner to have their election revoked

and to have real estate gains at issue taxed under the section

453 installment method.   Petitioners admittedly now seek the

benefits of the installment method because a substantial section

179 expense claimed on their 1994 income tax return was

disallowed; thus, they have been deprived of a deduction that

would have substantially offset those gains.     Section 15A.453-

1(d)(4), Temporary Income Tax Regs., supra, provides generally

that an election not to have the installment method apply will

not be revoked when one of the purposes for the revocation is the

avoidance of Federal income taxes.     Stated another way, the

election is not generally revocable where the taxpayer's desire

for the revocation is based on hindsight rather than foresight.

The Court, therefore, rejects petitioners' claim to have their
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1994 real estate gains taxed under the section 453 installment

method.



                                      Decision will be entered for

                           respondent for the deficiency in tax

                           and for petitioners for the addition

                           to tax.
