                       109 T.C. No. 15



                 UNITED STATES TAX COURT



   ESTATE OF MILDRED GERALDINE LETTS, DECEASED, JAMES P.
LETTS III AND JOANNE L. MAGBEE, COEXECUTORS, Petitioner v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



 Docket No. 8539-95.                     Filed November 24, 1997.


      Decedent's (D) husband (H) died in 1985, and D
 died in 1991. They were survived by two children,
 James P. Letts III and JoAnne Magbee. James P. Letts
 III was executor of both of their estates and signed
 both estate tax returns. D was also a coexecutor of
 H's estate, and JoAnne Magbee was a coexecutor of H's
 and D's estates. The beneficiaries of H's will were D,
 James P. Letts III, and JoAnne Magbee. The
 beneficiaries of D's will were James P. Letts III and
 JoAnne Magbee.

      In his will, H left certain property to D. H's
 estate claimed a marital deduction for the value of the
 property. H's estate elected not to treat D's interest
 as qualified terminable interest property (QTIP). H's
 estate was entitled to claim the marital deduction for
 the property only if D's interest in the property was
 not a terminable interest.
                               - 2 -


          The time to assess tax against H's estate had
     passed when D died. R did not examine H's estate tax
     return.

          D's estate tax return stated that the interest H
     left to D was a terminable interest but was not QTIP.
     D's estate (like H's estate) did not include the value
     of the property in its taxable estate.

          Held, D's gross estate includes the value of the
     life interest under the duty of consistency.

     Timothy J. Peaden, John C. Sawyer, and Michelle M. Henkel,

for petitioner.

     David Delduco and Charles P. Hanfman, for respondent.



                              OPINION


    COLVIN, Judge:   Respondent determined that petitioner is

liable for a $461,601 deficiency in Federal estate tax.    The

issue for decision is whether, because of the duty of

consistency, decedent's estate includes the value of property

that decedent's husband left to her.    We hold that it does.1

     Unless otherwise indicated, section references are to the

Internal Revenue Code.   Rule references are to the Tax Court

Rules of Practice and Procedure.


     1
       In light of our holding, we need not decide whether, as
respondent contends, decedent's husband's estate substantially
complied with the QTIP election requirements despite the fact
that the estate stated on the return that the property was not
QTIP, and the estate did not separately list terminable interest
property in Schedule M in its tax return.
                               - 3 -


                          I.   Background

     The facts are fully stipulated, and the case was submitted

under Rule 122.   Decedent died in Georgia.   The executors of her

estate live in Georgia.

A.   Decedent

     Decedent was Mildred Geraldine Letts.    Her husband was James

P. Letts, Jr.   Their children are James P. Letts III and JoAnne

L. Magbee (formerly JoAnne Geraldine Letts).

B.   The Will of James Letts

     James P. Letts, Jr. (James Letts, Jr.), signed his will in

1983 and amended it by codicil in 1984.     He named decedent, James

P. Letts III, and JoAnne L. Magbee executors.

     Item I of his will provided that all of his tangible

personal property was to pass to decedent if she survived him by

30 days.   In Item II of his will, he devised the residue of his

estate, after payment of funeral expenses, debts, and expenses of

administration, to decedent and their two children in trust (Item

II trust).   The amount of the Item II trust was equal to:

          the value of such residue minus the largest amount
     which can be withheld from this marital deduction
     bequest without increasing the Federal estate tax on my
     estate otherwise payable by reason of my death.

     The Item II trust authorized decedent to receive all of the

income from the trust for life at least quarterly, authorized

decedent to withdraw up to $40,000 per year, and authorized the
                                - 4 -


trustees to distribute the corpus to decedent for her comfort,

maintenance, and support.   The corpus of the Item II trust

consisted of terminable interest property in which decedent had

an income interest for life.

     The Item II trust authorized the executors of the Estate of

James Letts, Jr., to elect to treat the trust as "qualified

terminable interest property" (QTIP) for purposes of the Federal

estate tax marital deduction.   If the executors made a QTIP

election, the trustees were directed to pay the Federal estate

tax that resulted from including the marital property in

decedent's estate under sections 2044 and 2207A.

     Item III of the will of James Letts, Jr., created a trust

(Item III trust) for the benefit of decedent and the living

descendants of James Letts, Jr.   When decedent died, the

undistributed income from the Item II trust was to be paid to

decedent's estate and the corpus was to be paid to the Item III

trust.

C.   The Federal Estate Tax Return of James Letts, Jr.

     James Letts, Jr., died on November 7, 1985.   Ralph M.

Newberry, a certified public accountant, prepared his Federal

estate tax return.   The gross estate reported on the return was

$1,877,372.
                                - 5 -


     1.    Marital Deduction

     The Estate of James Letts, Jr., claimed a $1,317,969 marital

deduction.   Of that amount, $317,705 was attributable to assets

passing to decedent as joint tenant with the right of

survivorship.    The remaining $1,000,264 was for the Item II

trust, which was described on Schedule M as a "qualified marital

trust".   The Estate of James Letts, Jr., did not state on its

return whether or not the Item II trust property was terminable

interest property.    The Estate of James Letts, Jr., passed

$1,317,969 to decedent and paid no estate taxes.

     2.    Responses by the Estate of James Letts, Jr., to the
           Instructions on Line 4 of Page 2 and on Schedule M of
           the Estate Tax Return It Filed

     On page 2 of the return filed by the Estate of James Letts,

Jr., under "Elections by the Executor", the following question

appears on line 4:    "Do you elect to claim a marital deduction

for qualified terminable interest property (QTIP) under section

2056(b)(7)?"    The executor of the Estate of James Letts, Jr.,

placed an "x" in the box for "No".

     The instructions for line 4 say that if the gross estate

exceeds $500,000, the property for which the election is being

made must be listed on Schedule M and clearly marked as
                                 - 6 -


"qualified terminable interest property".    The executor listed no

property on Schedule M as QTIP.

     The estate tax return for the Estate of James Letts, Jr.,

did not include a copy of the will of James Letts, Jr.

     James P. Letts III signed the Federal estate tax return for

the Estate of James Letts, Jr.    It was filed on September 8,

1986.   Respondent did not examine or make any adjustments to that

return.   The time to assess tax against the Estate of James

Letts, Jr., expired on September 8, 1989, before decedent died.

D.   Decedent's Death and Federal Estate Tax Return

     In her will, decedent named James P. Letts III and JoAnne L.

Magbee executors of her estate.    Decedent died on April 20, 1991,

in Atlanta, Georgia, and was survived by her son, James P. Letts

III, and her daughter, JoAnne L. Magbee.

     The Item II trust had not been funded before decedent died.

     On January 20, 1992, petitioner applied for an extension of

time to file decedent's Federal estate tax return.

     John C. Sawyer of Alston & Bird in Atlanta prepared

decedent's Federal estate tax return.    Decedent's Federal estate

tax return noted that the executors of James Letts, Jr.'s estate

had not elected QTIP treatment for the Item II trust.    Decedent's

estate did not include the value of the Item II trust in
                               - 7 -


decedent's gross estate.   Petitioner attached the following

statement to its estate tax return:

            Statement Regarding Question 6 of Part 4

          Item Two of the Will of James P. Letts, Jr., the
     late husband of Mildred G. Letts, created a trust for
     her benefit. Pursuant to the terms of that trust,
     Mildred G. Letts was to receive all of the income from
     the trust for life. She also was given the power to
     withdraw up to $40,000 from the trust each year (see
     Schedule H), but had no other general power of
     appointment. On the Form 706 filed on behalf of the
     estate of James P. Letts, Jr., a copy of which is
     attached hereto, the executor did not elect to treat
     the Item Two trust as qualified terminable interest
     property. Consequently, the assets held in the item
     two trust are not includible in the gross estate of
     Mildred G. Letts under section 2044.

     James P. Letts III and JoAnne L. Magbee signed decedent's

Federal estate tax return.   It was filed on April 20, 1992.

     Respondent determined that the value of the Item II trust is

includable in decedent's gross estate.2   Petitioner concedes that

$40,000 of the trust property is includable in decedent's gross

estate because it was subject to decedent's power of withdrawal

or appointment at her death.

     2
       The parties agree that the value of the Item II trust is
$967,407 if the Court decides that the value of the Item II trust
is includable in decedent's gross estate.
                                 - 8 -


                           II.   Discussion

A.   Contentions of the Parties

     Petitioner points out, and respondent does not dispute, that

assessment of tax against the Estate of James Letts, Jr., is

barred by the statute of limitations.     Petitioner also points out

that section 20443 does not include in the gross estate of a

     3
         Sec. 2044 provides as follows:

     SEC. 2044. CERTAIN PROPERTY FOR WHICH MARITAL
     DEDUCTION WAS PREVIOUSLY ALLOWED.

          (a) General Rule.--The value of the gross estate
     shall include the value of any property to which this
     section applies in which the decedent had a qualifying
     income interest for life.

          (b) Property To Which This Section Applies.--This
     section applies to any property if--

                 (1) a deduction was allowed with respect to
            the transfer of such property to the decedent--

                      (A) under section 2056 by reason of
                 subsection (b)(7) thereof, or

                      (B) under section 2523 by reason of
                 subsection (f) thereof, and

                 (2) section 2519 (relating to dispositions
            of certain life estates) did not apply with
            respect to a disposition by the decedent of part
                                                     (continued...)
                                - 9 -


surviving spouse the value of property for which no QTIP election

was made.    Thus, petitioner contends that the value of the Item

II trust is not includable in decedent's gross estate.

     Respondent contends that petitioner must include the value

of the Item II trust in decedent's gross estate under the duty of

consistency.4   For reasons discussed next, we agree with

respondent.

B.   Marital Deduction

     A tax is imposed on the transfer of the taxable estate of

every decedent who is a citizen or resident of the United States.

Sec. 2001(a).    In computing the value of the taxable estate, an

estate may deduct the value of certain interests which pass from

the decedent to the decedent's spouse (marital deduction).    Sec.

2056(a).    Congress enacted the marital deduction in 1948 and



     3
      (...continued)
          or all of such property.

          (c) Property Treated    as Having Passed From
     Decedent.--For purposes of   this chapter and chapter 13,
     property includible in the   gross estate of the decedent
     under subsection (a) shall   be treated as property
     passing from the decedent.
     4
       Respondent first raised this issue in an amendment to
answer filed on Oct. 21, 1996. Respondent concedes that this
issue is new matter under Rule 142(a). Thus, respondent has the
burden of proving that the duty of consistency applies here.
Rule 142(a); see Cluck v. Commissioner, 105 T.C. 324, 331 n.11
(1995).
                                  - 10 -


expanded it in 1981.       H. Rept. 97-201, at 159-161 (1981), 1981-2

C.B. 352, 377-378.       As a result, bequests of property from a

predeceasing spouse to the surviving spouse are in certain

circumstances eligible for an unlimited marital deduction.         Sec.

2056(a).       It is a basic policy of the marital deduction that

property that passes untaxed from a predeceasing spouse to a

surviving spouse is included in the estate of the surviving

spouse.       Estate of Shelfer v. Commissioner, 86 F.3d 1045, 1048

(11th Cir. 1996), revg. 103 T.C. 10 (1994); Estate of Cavenaugh

v. Commissioner, 100 T.C. 407, 416 (1993), affd. in part and

revd. in part on other grounds 51 F.3d 597 (5th Cir. 1995).

        The marital deduction provides special rules for gifts of

terminable interest property (e.g., life interests).        Sec.

2056(b).       A terminable interest is an interest passing to a

surviving spouse that will end on the lapse of time, on the

occurrence of an event or contingency, or on the failure of an

event or contingency to occur.       Sec. 2056(b)(1).   The marital

deduction is not available for terminable interest property given

to the surviving spouse unless the estate of the predeceasing

spouse elects to treat the property as QTIP.       Sec. 2056(b)(1),

(7).5       The estate of the predeceasing spouse is denied a marital


        5
            The QTIP election is available for estates of decedents
                                                        (continued...)
                                - 11 -


deduction for terminable interest property if that estate does

not make the QTIP election.    These rules permit the predeceasing

spouse's estate to choose QTIP treatment and thus defer taxation

of a terminable interest, at the price of having it included in

the gross estate of the surviving spouse under section 2044.

     C.   Whether the Duty of Consistency Applies

     1.   Background

     The duty of consistency6 prevents a taxpayer from benefiting

in a later year from an error or omission in an earlier year

which cannot be corrected because the time to assess tax for the

earlier year has expired.     Herrington v. Commissioner, 854 F.2d

755, 757 (5th Cir. 1988), affg. Glass v. Commissioner, 87 T.C.

1087 (1986); Southern Pac. Transp. Co. v. Commissioner, 75 T.C.

497, 838-839 (1980).   The duty of consistency prevents a taxpayer

who has benefited from a past representation from adopting a

position inconsistent with that taken in a year barred by the

statute of limitations; the doctrine thus prevents a taxpayer



     5
      (...continued)
dying after Dec. 31, 1981. Economic Recovery Tax Act of 1981,
Pub. L. 97-34, sec. 403(d) and (e)(1), 95 Stat. 172, 302, 305.
     6
       The duty of consistency is also referred to as quasi-
estoppel. E.g., Cluck v. Commissioner, supra at 331; Mayfair
Minerals, Inc. v. Commissioner, 56 T.C. 82 (1971), affd. 456 F.2d
622 (5th Cir. 1972); see Johnson, "The Taxpayer's Duty of
Consistency", 46 Tax L. Rev. 537, 544 (1991).
                               - 12 -


from claiming that he or she should have paid more tax before and

so avoiding the present tax.   Eagan v. United States, 80 F.3d 13,

16 (1st Cir. 1996); Lewis v. Commissioner, 18 F.3d 20, 26 (1st

Cir. 1994), vacating and remanding in part T.C. Memo. 1992-391.

Courts have applied the duty of consistency to prevent taxpayers

from permanently excluding income that is taxable in some year,7

e.g., Grayson v. United States, 437 F. Supp. 58, 60 (N.D. Ala.

1977), or from deducting the same expense in 2 or more taxable

years, e.g., Robinson v. Commissioner, 181 F.2d 17, 18 (5th Cir.

1950), affg. 12 T.C. 246 (1949).

     The roots of the taxpayer's duty of consistency are found in

R.H. Stearns Co. v. United States, 291 U.S. 54 (1934), in which

the Supreme Court applied the duty based on the principle that no

one may base a claim on an inequity of his or her own making.

Id. at 61-62; Alamo Natl. Bank v. Commissioner, 95 F.2d 622, 623

(5th Cir. 1938) ("It is no more right to allow a party to blow

hot and cold as suits his interest in tax matters than in other

relationships"), affg. 36 B.T.A. 402 (1937).8


     7
       In Estate of Shelfer v. Commissioner, 103 T.C. 10 (1994),
revd. 86 F.3d 1045 (11th Cir. 1996), the Commissioner did not
contend that the duty of consistency applied, nor did we decide
whether it applied.
     8
       The U.S. Court of Appeals for the Eleventh Circuit, the
court to which this case is appealable, adopted as binding
                                                   (continued...)
                             - 13 -


     2.   Elements of the Duty of Consistency

     The taxpayer's duty of consistency applies if:

          (a) The taxpayer made a representation of fact or

reported an item for tax purposes in one tax year;

          (b) the Commissioner acquiesced in or relied on that

fact for that year; and

          (c) the taxpayer desires to change the representation

previously made in a later tax year after the earlier year has

been closed by the statute of limitations.9   LeFever v.

Commissioner, 103 T.C. 525, 543 (1994), affd. 100 F.3d 778 (10th

Cir. 1996); see also Kielmar v. Commissioner, 884 F.2d 959, 965

(7th Cir. 1989); Herrington v. Commissioner, supra at 758; Shook

v. United States, 713 F.2d 662, 667 (11th Cir. 1983); Hess v.

United States, 210 Ct. Cl. 483, 537 F.2d 457, 463 (1976); Beltzer

v. United States, 495 F.2d 211, 212 (8th Cir. 1974); Cluck v.

Commissioner, 105 T.C. 324, 332 (1995).   When these requirements

are met, the Commissioner may act as if the previous




     8
      (...continued)
precedent all of the decisions of the former U.S. Court of
Appeals for the Fifth Circuit filed by Sept. 30, 1981. Bonner v.
City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
     9
       These elements were first stated in McMillan v. United
States, 14 AFTR 2d 5704, 64-2 USTC par. 9720 (S.D. W. Va. 1964).
                              - 14 -


representation is true, even if it is not, and the taxpayer may

not assert the contrary.   Herrington v. Commissioner, supra.

      The three elements of the duty of consistency refer to

conflicting representations that are made by a taxpayer.

However, as discussed next, the duty of consistency can also be

applied to bind one person to a representation made by another

where the two are deemed to be in privity.   We will first decide

whether the duty of consistency applies between the Estates of

James Letts, Jr., and of decedent; we will then decide whether

the three elements of the duty of consistency are present in this

case.

      3.   Whether the Estates of Decedent and Her Husband Are
           Subject to the Duty of Consistency

      Petitioner contends that the duty of consistency does not

apply between decedent's estate and the Estate of James Letts,

Jr.   We disagree.

      The duty of consistency can bind a beneficiary of an estate

to a representation made on an estate tax return if the

beneficiary was a fiduciary of the estate.   Beltzer v. United

States, supra; Cluck v. Commissioner; supra at 333; LeFever v.

Commissioner, supra at 543; Griffith v. United States, 27 AFTR 2d

71-436, 71-1 USTC par. 9280 (N.D. Tex. 1971); McMillan v. United

States, 14 AFTR 2d 5704, 64-2 USTC par. 9720 (S.D. W. Va. 1964);
                               - 15 -


accord Hess v. United States, supra.    A husband and wife can have

interests so closely aligned that one may be estopped under the

duty of consistency by a prior representation of the other.

Cluck v. Commissioner, supra at 333-336.     The same can be true of

the estates of a husband and a wife.    Whether there is sufficient

identity of interests between the parties to apply the duty of

consistency depends on the facts and circumstances of each case.

Id. at 335.

     There is a sufficient identity of interests between the

Estates of James Letts, Jr., and of decedent to trigger the duty

of consistency.    Decedent and James Letts, Jr., were married.

Their estates were a single economic unit.    Decedent's husband

left his estate to decedent, James P. Letts III, and JoAnne

Magbee; and decedent left her estate to James P. Letts III and

JoAnne Magbee.    Decedent was an executrix of her husband's

estate.   James P. Letts III signed both estate tax returns.

JoAnne Magbee is also a coexecutor of, and signed the estate tax

return for, decedent's estate.

     The U.S. Court of Claims did not apply the duty of

consistency between an estate and its beneficiaries in Ford v.

United States, 149 Ct. Cl. 558, 276 F.2d 17 (1960).    The U.S.

Court of Claims in Hess v. United States, supra, and the U.S.

Court of Appeals for the Eighth Circuit in Beltzer v. United
                               - 16 -


States, supra, applied the duty of consistency between an estate

and its beneficiaries and distinguished Ford v. United States,

supra, because the taxpayer-beneficiaries in Ford were minor

children in Brazil who had no knowledge of what was written in

their father's estate tax return in the United States.   Here, in

contrast to Ford, decedent was an adult, a coexecutor, and a

beneficiary of the estate of her husband, James Letts, Jr., and

James P. Letts III was a beneficiary of and signed the returns of

the Estates of both James Letts, Jr., and decedent.   Thus, the

instant case is like the several cases cited above where the duty

of consistency applied and is distinguishable from Ford v. United

States, supra.

     We conclude that decedent's estate and the Estate of James

Letts, Jr., are sufficiently related to be treated as one

taxpayer for purposes of the duty of consistency.

     4.   Whether the Duty of Consistency Applies Here

     We next decide whether respondent has shown that the three

elements of the duty of consistency are present here.

          a.     Whether the Taxpayer Made a Representation of Fact
                 or Reported an Item for Tax Purposes

     The Estate of James Letts, Jr., included the value of the

Item II trust in the marital deduction.   That estate was entitled
                               - 17 -


to claim the marital deduction for the property only (1) if it

was not terminable interest property, or (2) if it was terminable

interest property for which a QTIP election was made.

     The Estate of James Letts, Jr., clearly indicated that the

property was not QTIP.    James P. Letts III, as executor for the

Estate of James Letts, Jr., answered "No" to the question on line

4 of the return, "Do you elect to claim a marital deduction for

qualified terminable interest property (QTIP) under section

2056(b)(7)?"   Consistent with that answer, he did not separately

list any terminable interest property in Schedule M.    Thus, the

estate eliminated one of the two grounds stated above for

deducting the value of the Item II trust property as a marital

deduction.   The only other ground for including the value of the

Item II trust property in the marital deduction would be if the

Item II trust property was not terminable interest property.

Thus, the Estate of James Letts, Jr., represented that the Item

II trust property was not terminable interest property.

     For purposes of the duty of consistency, a taxpayer's

treatment of an item on a return can be a representation that

facts exist which are consistent with how the taxpayer reports

the item on the return.   For example, a failure to report income
                             - 18 -


may be an implied statement of the facts relating to the

taxpayer's receipt of the funds, which, under the duty of

consistency, a taxpayer cannot later repudiate.     Wentworth v.

Commissioner, 244 F.2d 874, 875 (9th Cir. 1957) (not reporting

the receipt of funds on an income tax return was a representation

that the funds were a loan repayment), affg. 25 T.C. 1210 (1956);

Doneghy v. Alexander, 118 F.2d 521, 524 (10th Cir. 1941) (not

reporting interest in a trust as income was a representation that

the taxpayer had zero basis in the trust); Portland Oil Co. v.

Commissioner, 109 F.2d 479, 485-486 (1st Cir. 1940) (not

reporting a sale in 1929 was a representation that the sale did

not occur in 1929), affg. 38 B.T.A. 757 (1938).10



     10
       Cf. Ross v. Commissioner, 169 F.2d 483, 496 (1st Cir.
1948), revg. and remanding a Memorandum Opinion of this Court
dated Feb. 10, 1947. In Ross, the taxpayer's position on his
earlier return was that his accrued salary was income when
received. On his later return, the taxpayer's position was that
he had constructively received his accrued salary in the earlier
year. The U.S. Court of Appeals for the First Circuit did not
estop the taxpayer from taking this position on the second return
because the taxpayer's change in position related to a question
of law, not a question of fact. Id. at 496. Also, unlike this
case, in Ross, the Commissioner had detailed information about
the accrued salaries before assessment of the earlier return was
barred by the statute of limitations and before the later return
was filed. Id. at 495-496. Thus, Ross is distinguishable from
this case.
                               - 19 -


     Petitioner listed the three elements for the duty of

consistency in its brief, but did not argue that the first

element is not satisfied.11   We conclude that the first element

for the duty of consistency is satisfied.

          b.   Whether the Commissioner Acquiesced in or Relied
               on the Reporting of the Item

     Petitioner contends that respondent did not acquiesce in or

rely on anything in the return of the Estate of James Letts, Jr.,

because respondent did not examine it.   We disagree.

     The Commissioner acquiesces in or relies on a fact if a

taxpayer files a return that contains an inadequately disclosed

item of which the Commissioner was not otherwise aware, the

Commissioner accepts that return, and the time to assess tax

expires without an audit of that return.    Herrington v.

Commissioner, 854 F.2d at 758; Mayfair Minerals, Inc. v.

Commissioner, 56 T.C. 82, 91 (1971), affd. 456 F.2d 622 (5th Cir.

1972); see Spencer Medical Associates v. Commissioner, T.C. Memo.

1997-130; Hughes & Luce, L.L.P. v. Commissioner, T.C. Memo. 1994-

559, affd. on another issue 70 F.3d 16 (5th Cir. 1995).     The



     11
       Petitioner concedes that the negative QTIP answer is a
representation on the return of the Estate of James Letts, Jr.,
for purposes of these elements.
                                - 20 -


Estate of James Letts, Jr., did not provide any facts to

respondent that would show that the Item II trust property was

terminable interest property.     For example, the estate tax return

of the Estate of James Letts, Jr., did not include a copy of his

will.     The Commissioner may rely on a presumption of correctness

of a return or report that is given to the Commissioner under

penalties of perjury.     Hughes & Luce, L.L.P. v. Commissioner,

supra.     The time to assess tax against the Estate of James Letts,

Jr., expired.     Thus, the second element has been satisfied.

Herrington v. Commissioner, supra; Mayfair Minerals, Inc. v.

Commissioner, supra; Spencer Medical Associates v. Commissioner,

supra; Hughes & Luce, L.L.P. v. Commissioner, supra.

             c.   Whether the Taxpayer Is Changing a Representation
                  Previously Made After the Time To Assess Tax Has
                  Passed

        Petitioner represented on its estate tax return that the

Item II trust property was terminable interest property.     That

representation is inconsistent with the representation made on

the return of the Estate of James Letts, Jr., that the Item II

trust property was not terminable interest property.     Decedent

died after the time to assess tax against the Estate of James

Letts, Jr., had passed.     Thus, the third element for the duty of

consistency is satisfied.
                               - 21 -


     Petitioner points out that both it and the Estate of James

Letts, Jr., represented that the Estate of James Letts, Jr., did

not elect to treat the Item II trust property as QTIP.      However,

the fact that both estates made a consistent representation about

the QTIP election does not erase the fact that the estates made

inconsistent representations about whether the Item II trust

property was terminable interest property.

            d.   Conclusion

     We conclude that all three elements for the duty of

consistency are satisfied.

     5.     Petitioner's Other Contentions

            a.   Whether Applying the Duty of Consistency
                 Circumvents the Statute of Limitations

     Petitioner contends that applying the duty of consistency

here would improperly circumvent the statute of limitations.     We

disagree.    It is well established that the duty of consistency

arises only if the time to assess tax on the first tax return has

passed.   See R.H. Stearns Co. v. United States, 291 U.S. at 61;

Kielmar v. Commissioner, 884 F.2d at 965; Herrington v.

Commissioner, supra at 757; Hess v. United States, 537 F.2d at

463; Beltzer v. United States, 495 F.2d at 212; Cluck v.

Commissioner, 105 T.C. at 331-332; McMillan v. United States, 14

AFTR 2d 5704, 64-2 USTC par. 9720 (S.D. W. Va. 1964).
                               - 22 -


          b.   Whether This Is a Question of Law

     Petitioner contends that the duty of consistency does not

apply if the inconsistency concerns a question of law and both

the taxpayer and Commissioner have equal access to the facts.

See LeFever v. Commissioner, 100 F.3d at 788; Herrington v.

Commissioner, 854 F.2d at 758.     However, petitioner does not

dispute that the doctrine applies if the inconsistency involves

an issue of fact or a mixed question of fact and law.     LeFever v.

Commissioner, 100 F.3d at 788; Herrington v. Commissioner, supra;

Mayfair Minerals, Inc. v. Commissioner, 456 F.2d 622, 623 (5th

Cir. 1972), affg. 56 T.C. 82 (1971).

     Petitioner contends that the duty of consistency does not

apply here because there is no inconsistency concerning a

question of fact.    Petitioner contends that the only question is

whether the Estate of James Letts, Jr., must strictly comply with

QTIP election requirements before a QTIP election is made, which

petitioner contends is a question of law.

     We disagree.    The inconsistency at issue is whether the

property James Letts, Jr., left to decedent is terminable

interest property.    This is a mixed question of fact and law.   It

is not purely a question of law.
                             - 23 -


     Petitioner contends that the fact that the parties agreed to

submit this case under Rule 122 shows that no facts are in

dispute and only questions of law remain.   We disagree.   It is

true that the facts are fully stipulated.   It is also true that

the stipulated facts show that the Estate of James Letts, Jr., by

claiming the marital deduction for the value of the Item II trust

property and not electing QTIP treatment for it represented in

effect that the property was not terminable interest property,

while decedent's estate represented that it was.   Thus, the

stipulated facts show that the two estates made inconsistent

factual representations.

     6.   Conclusion

     We conclude that the duty of consistency precludes

petitioner from excluding the value of the Item II trust property

from the gross estate.

     To reflect the foregoing and concessions,


                                              Decision will be

                                   entered under Rule 155.
