                            T.C. Memo. 1998-327



                          UNITED STATES TAX COURT



                        ROGER FARMER, Petitioner v.
               COMMISSIONER OF INTERNAL REVENUE, Respondent


        Docket No. 18946-96.                 Filed September 17, 1998.


        Roger Farmer, pro se.


        Michelle Or, for respondent.


                            MEMORANDUM OPINION


        NAMEROFF, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1       Respondent determined deficiencies in petitioner's 1990




        1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -


and 1991 Federal income taxes in the amounts of $2,734 and

$6,418, respectively.

     The issue for decision is whether petitioner is entitled to

carry forward 1983 and 1984 net operating losses to the tax years

at issue.

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    At the time he filed his

petition, petitioner resided in Arcadia, California.

Background

     Petitioner operated a sole proprietorship selling yachts

during the years relevant to this case.   In 1983, he incurred a

net operating loss (NOL) of $27,488.   In 1984, petitioner

incurred another NOL in the amount of $11,064.   Petitioner

carried the NOL’s forward, and because of additional NOL’s

incurred in 1985 and 1986, the losses were carried forward to the

years in issue, 1990 and 1991.2   Petitioner did not carry the

1983 and 1984 NOL’s back to prior years, nor did he make an

election to waive carryback to prior years.   If petitioner had

carried the 1983 and 1984 NOL’s back, they would have been fully

absorbed in 1981.



     2
        Respondent’s determination in the notice of deficiency
includes the allowance of the carryforward of the 1985 and 1986
losses and their full absorption in 1990.
                               - 3 -


     Respondent disallowed the 1983 and 1984 NOL’s in 1990 and

1991, contending that petitioner failed to first carry the losses

back and also failed to make an election to waive the carryback.

Petitioner admitted that the NOL's were carried forward

erroneously.   Petitioner contended that if the NOL’s are

disallowed for 1990 and 1991, he should be entitled to carry them

back for refund to the proper years, 1980 and 1981, under the

mitigation provisions of the Code.     Alternatively, he contended

that the refund should offset the deficiencies herein under some

equitable recoupment theory.

Discussion

     Individuals are permitted to carry net operating losses from

one taxable year to another.   Sec. 172(a).   In general, taxpayers

who sustain NOL’s must first carry such losses back 3 years, and,

if unabsorbed by those years, then forward 15 years.    Sec.

172(b)(1)(A) and (2).   However, the taxpayer may elect to

relinquish the entire carryback period and simply carry the loss

forward for 15 succeeding years.   Sec. 172(b)(3).   To make this

election, the statute expressly requires the taxpayer to file the

election to relinquish the carryback period by the due date,

including extensions of time, for filing the taxpayer’s return

for the taxable year of the NOL.   The election, once made, is

irrevocable.   Moreover, the statute directs that the election
                              - 4 -


shall be made in the manner prescribed by the Secretary.    Sec.

172(b)(3).

     Such an election:

          shall be made by a statement attached to the
          return (or amended return) for the taxable
          year. The statement required * * * shall
          indicate the section under which the election
          is being made and shall set forth information
          to identify the election, the period for
          which it applies, and the taxpayer’s basis or
          entitlement for making the election.

Sec. 301.9100-12T(d), Temporary Proced. & Admin. Regs., 57 Fed.

Reg. 43896 (Sept. 23, 1992) (redesignating sec. 7.0, Temporary

Income Tax Regs., 42 Fed. Reg. 1470 (Jan. 7, 1977)).

     Petitioner did not file an election under section 172(b)(3).

In addition, it was agreed that if the 1983 and 1984 NOL’s had

been properly carried back, both NOL’s would have been entirely

absorbed in the carryback period.   Therefore, we must conclude

that petitioner is not entitled to any carryover to 1990 and

1991.

     Petitioner argues that the mitigation provisions, sections

1311 through 1314, apply in this circumstance, and he should be

allowed to carry back the NOL’s to 1980 and 1981.   Respondent

argues that the Court is without jurisdiction to consider

petitioner’s mitigation argument because the tax years 1980 and

1981 are not before the Court and there has not been a

determination as required under section 1313(a).
                               - 5 -


     Where applicable, the mitigation provisions permit the

correction of an item that is shown to be erroneous by a

determination in an administrative or judicial proceeding

relating to another year.   Fruit of the Loom, Inc. v.

Commissioner, T.C. Memo. 1994-492, affd. 72 F.3d 1338 (7th Cir.

1996).   If the mitigation provisions apply, the taxable income

for the year of the error may be adjusted under section 1314.

Sec. 1311(a).   In essence, the mitigation provisions of the Code

act as an exception to the statute of limitations.   If the

requirements of sections 1311 through 1314 are met, a year closed

by the statute of limitations can be reopened for the limited

purposes of the mitigation sections.   In this case, if mitigation

were to apply, it would mean reopening 1980 and 1981 in order to

carry back the 1983 and 1984 NOL’s.

      However, respondent determined deficiencies for 1990 and

1991, which petitioner petitioned for review.   We have

jurisdiction only to redetermine the 1990 and 1991 deficiencies.

The mitigation provisions do not apply to 1990 and 1991.

Accordingly, we lack jurisdiction to redetermine petitioner’s

income tax liability for 1980 and 1981.   Sec. 6214(b).

     Finally, petitioner requests that the refunds that would be

generated as a result of the carrybacks to 1980 and 1981 apply as

a credit to offset the tax liability he owes for 1990 and 1991.

Petitioner is, in effect, raising the theory of equitable
                                 - 6 -


recoupment.   Putting aside questions of the Court’s jurisdiction

to apply equitable recoupment, see Estate of Mueller v.

Commissioner, __ F.3d __ (6th Cir., Aug. 20, 1998), affg. 107

T.C. 189 (1996), it is not available in these circumstances.

     Equitable recoupment may apply in certain circumstances to

overcome the bar of the statute of limitations.       “[A] claim of

equitable recoupment will lie only where the Government has taxed

a single transaction, item, or taxable event under two

inconsistent theories.”   United States v. Dalm, 494 U.S. 596, 605

n.5 (1990).   Here, there are no inconsistent theories of taxation



involved.   If an NOL is claimed in the wrong year, it is not

allowable, and that is respondent’s consistent position.

Therefore there is no basis for petitioner’s equitable recoupment

claim.

     To reflect the foregoing,



                                              Decision will be entered

                                         for respondent.
