                        T.C. Memo. 1999-378



                      UNITED STATES TAX COURT



       JOHN M. HARDING AND MARY J. HARDING, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3527-98.                 Filed November 16, 1999.



     John Harding and Mary Harding, pro sese.

     Kelly A. Blaine, for respondent.



                        MEMORANDUM OPINION

     GERBER, Judge:   Respondent determined a $11,231 income tax

deficiency for petitioners’ 1991 tax year.    The case was
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submitted fully stipulated under Rule 122.1   On their 1994 income

tax return, petitioners attempted to waive the carryback of their

claimed net operating loss (NOL).   Petitioners now claim their

attempt was without effect.   The question we consider is whether

petitioners properly elected to waive the carryback of an NOL

under section 172(b)(3) and whether that election is binding.

     Background--Petitioners resided in Yorba Linda, California,

at the time their petition was filed in this case.   Petitioners

filed a timely 1991 joint Federal income tax return reflecting a

$11,231 income tax liability.   Petitioners filed a timely 1994

joint Federal income tax return containing the following

statement:

     The above named taxpayer incurred a net operating loss
     in the taxable year ending December 31, 1994 and is
     entitled to a three-year carryback period with respect
     to that loss under Code Section 172(B)(1) of the
     Internal Revenue Code.

     Pursuant to Code Section 172(B)(3), the taxpayer hereby
     elects to relinquish the entire carryback period with
     respect to the net operating loss incurred in the
     taxable year ending December 31, 1994.

     Prior to filing their 1994 return, petitioners had claimed a

NOL for their 1993 taxable year that had been carried back to

their 1991 tax year and caused the elimination of their 1991

income tax liability.   After petitioners had filed their 1994


     1
        All Rule references are to this Court’s Rules of Practice
and Procedure and all section references are to the Internal
Revenue Code, in effect for the taxable year in question.
                               - 3 -

return, respondent examined petitioners’ 1993 return and

disallowed the 1993 NOL, resulting in an income tax deficiency

for 1991 in the amount of the original $11,231 liability.

     Discussion--Petitioners now claim that the election made on

their 1994 return not to carry their 1994 NOL back 3 years was

ambiguous and/or invalid.   Section 172(a) permits the carryover

and carryback of NOL deductions.    Section 172(b)(1)(A)(i)2

permitted the carryback of an NOL deduction to the preceding

3 taxable years.   Taxpayers were also permitted to elect to waive

or relinquish the carryback deduction and only carry forward

their NOLs.   See sec. 172(b)(3).   The Secretary promulgated the

following regulation concerning taxpayers’ elections to waive NOL

carrybacks:

     [The election] shall be made by a statement attached to
     the return (or amended return) for the taxable year.
     The statement required when making an election pursuant
     to this section 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., 42 Fed.

Reg. 1470 (Jan. 7, 1977).

     Petitioners’ statement on their 1994 return contains no

ambiguity about their intent to     “relinquish the entire carryback

     2
         For purposes of this case involving a 1994 net operating
loss and a 1991 taxable year, we consider sec. 172(b)(1)(A)(i)
prior to its being amended by the Taxpayer Relief Act of 1997,
Pub. L. 105-34, sec. 1082(a)(1) and (2), 111 Stat. 950.
                                - 4 -

period with respect to the net operating loss incurred in the

taxable year ending December 31, 1994.”   The only questionable

aspect about petitioners’ statement is that they referred to

section 172(B)(3) instead of section 172(b)(3).    The use of the

upper case “B”, however, does   not create confusion as to their

intentions or as to other possible alternatives that may have

been available under section 172.   In all other respects, the

statement made by petitioners, as part of their 1994 return,

meets the statutory and regulatory requirements.

     Several cases have considered the effectiveness of

taxpayers’ elections to waive NOL carrybacks.   It has been held

that the essence of section 172(b)(3)(C) is that a “taxpayer

unequivocally communicates his election and binds himself to his

decision concerning the best use of his net operating loss.”

Young v. Commissioner, 783 F.2d 1201, 1206 (5th Cir. 1986).

Elections made in compliance with the regulatory procedures or

requirements have been held to be binding.   In Santi v.

Commissioner, T.C. Memo. 1990-137, it was held that the following

statement was sufficient to waive the carryback and permit the

carryover of the taxpayer’s NOL deduction:   “Taxpayer elects to

carry net operating loss over under I.R.C. 172(b)(2)(C).”   In

that case, even though the taxpayer’s statement identified the

wrong portion of section 172, the Court interpreted the statement

in the context of the entire return and held that the waiver was
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valid.   Likewise, in Carlstedt Associates, Inc., v. Commissioner,

T.C. Memo. 1989-27, the following statement was found to be

unequivocal and a binding election:      “IN ACCORDANCE WITH CODE

SECTION 172(b) TAXPAYER HEREBY ELECTS TO RELINQUISH THE ENTIRE

CARRYBACK PERIOD WITH RESPECT TO THE CURRENT NET OPERATING LOSS.”

In Powers v. Commissioner, 43 F.3d 172 (5th Cir. 1995), affg. in

part, revg. in part and remanding 100 T.C. 457 (1993), however,

the Court of Appeals for the Fifth Circuit held that referencing

a Code section other than section 172 served to make a taxpayer’s

election ineffective.   In Powers, the taxpayer referenced section

56(b)(3)(C), and no reference was made to section 172.      The Court

of Appeals for the Fifth Circuit observed in Powers that Santi v.

Commissioner, supra, was distinguishable because the taxpayer

there referred to section 172.    See Powers v. Commissioner, supra

at 178 n.7.   By the same token, petitioners’ case may be

distinguished from Powers.

     In a case involving a section 172(b)(3)(C) election and the

taxpayers’ attempt to split “regular NOLs” and “alternative

minimum tax NOLs”, we held that the taxpayers’ election was

unambiguous on its face and binding, even though the taxpayers

may have intended to make the election for only one type of NOL.

Miller v. Commissioner, 104 T.C. 330 (1995), revd. 99 F.3d 1042

(11th Cir. 1996).   The Court of Appeals for the Eleventh Circuit

reversed, holding that the taxpayers were attempting an election
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to split the NOLs because they used the word “loss” instead of

“losses” which was inconsistent with the election of both types

of NOL.   In reaching its holding, the Court of Appeals looked to

extrinsic evidence outside of the taxpayers’ statement on their

return.   The Court of Appeals considered subsequent amended

returns, expert testimony on the meaning of the term “net

operating loss”, and the intent of the taxpayers’ return

preparer.   Miller v. Commissioner, 99 F.3d 1042 (11th Cir. 1996),

revg. 104 T.C. 330 (1995).

     With that backdrop, we hold that petitioners’ 1994 election

was valid and binding, and that it precludes their current

attempt to carry back the 1994 NOL deduction to 1991.       There is

no ambiguity as to petitioners’ intentions or extrinsic evidence

showing that petitioners intended not to waive the carryback of

their 1994 NOL.   To the contrary, at the time of filing their

1994 return, petitioners had applied their 1993 NOL to eliminate

their 1991 tax liability.    We recognize petitioners’ dilemma

caused by the post-1994 disallowance of their 1993 NOL deduction,

which in turn led to respondent’s determination of a 1991 income

tax deficiency.   However, the statute recites that such an

election, once made, is irrevocable.       See sec. 172(b)(3).

     To reflect the foregoing,

                                         Decision will be entered

                                 for respondent.
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