                      United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-1881
                                    ___________

Michael C. Hollen; Joan L. Hollen,   *
                                     *
          Petitioners,               * Appeal from the United States
                                     * Tax Court.
    v.                               *    [UNPUBLISHED]
                                     *
Commissioner of Internal Revenue,    *
                                     *
          Respondent.                *
                                ___________

                              Submitted: December 13, 2001
                                 Filed: January 16, 2002
                                  ___________

Before WOLLMAN, Chief Judge, JOHN R. GIBSON, and MAGILL, Circuit Judges.
                              ___________

PER CURIAM.

        Michael and Joan Hollen appeal from the tax court’s1 decision upholding their
liability for taxes and additions to tax. We affirm.

      Michael and Joan Hollen, husband and wife, filed joint tax returns for 1988.
Michael Hollen is a dentist who operates his business through a professional
corporation, Michael C. Hollen, D.D.S., Professional Corporation (Hollen, P.C.). In
1982, the Hollens and two other couples purchased a fruit and flower farm in San


      1
          The Honorable L. Paige Marvel, United States Tax Court.
Diego County, California, known as the Blue Bird Ranch (the ranch). Michael
Hollen and the two other husbands formed a partnership to operate and manage the
ranch. All of the couples orally agreed to transfer their interests in the ranch to the
partnership. The transfer was never reduced to writing, and thus it was invalid under
California law. Nevertheless, the partnership and the Hollens acted as if the
partnership owned the ranch. The partnership claimed the expenses of operating the
ranch, as well as depreciation of ranch assets, on its partnership tax returns. Michael
Hollen signed all the partnership’s tax returns. The IRS did not question the
ownership of the ranch, even when it audited the partnership’s tax returns. Michael
Hollen never informed the IRS that the transfer to the partnership was invalid.

      In October 1988, the Hollens and the other couples sold the ranch. Each couple
received $10,000 directly as a result of the sale, with the purchasers assuming the
remaining debt on the ranch. The partnership dissolved following the sale.

       On March 15, 1989, the partnership filed a 1988 partnership tax return in which
it recognized gain of $631,507 from sale of the ranch. The partnership issued to
Michael Hollen a Schedule K-1, Partner’s Share of Income, Credits, Deductions, Etc.,
which included a one-third share of the gain from the sale of the ranch.

       The Hollens filed for an extension for filing their 1988 income tax return, and
with this request paid an estimated tax liability of $80,000 based on information from
Michael Hollen’s Schedule K-1. In July 1989, Michael Hollen filed Hollen, P.C.’s
1988 federal income tax return, which did not reflect any income from the sale of the
ranch or income from the partnership. In October 1989, Michael Hollen filed an
amended return for Hollen, P.C., claiming that, prior to the sale of the ranch, he
intended to transfer his personal interest in the partnership to Hollen, P.C. The
amended return did not report any gain from the sale of the ranch. The Hollens also
filed their 1998 income tax return, which did not report any gain from the sale of the
ranch or any partnership income, in October 1989. On Schedule D of the return, the

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Hollens listed the sale of Michael Hollen’s partnership interest to Hollen, P.C. for a
price equal to their adjusted basis in the property, thus resulting in no gain or loss.
The Hollens claimed an overpayment of $78,946.

       In 1992 or 1993, the IRS audited both the partnership’s 1988 tax return and the
Hollens’ 1988 individual income tax return. The IRS assessed a deficiency against
the Hollens in which it ignored the purported transfer of Michael Hollen’s partnership
interest to Hollen, P.C. The IRS also made additions to tax under I.R.C. §§ 6653(a)
and 6661 (1988). The Hollens appealed the assessment to the tax court, which upheld
the IRS’s decision. Hollen v. C.I.R., No. 5586-97 (T.C. filed Jan. 9, 2001) (adopting
opinion of the special trial judge, 79 T.C.M. (CCH) 1719 (March 24, 2000)). After
adjusting the total tax due in the light of various concessions made by the IRS and the
Hollens, the tax court entered a judgment against the Hollens for $55,550 in tax and
$16,655 in additions to tax.

       Before the tax court, the Hollens argued that because the transfer to the
partnership was invalid, they owned the ranch individually and therefore were liable
for tax on the sale to the extent the gain exceeds their original basis in the farm, with
no adjustments for the depreciation taken by the partnership. The tax court held that
this argument was barred by the doctrine of the duty of consistency, which prohibits
taxpayers from taking one position on a tax return and a contrary position on a
subsequent return after the limitations period has run for the earlier year. As set forth
in Beltzer v. United States, 495 F.2d 211, 212 (8th Cir. 1974), the taxpayer is placed
under a duty of consistency when:

      (1) the taxpayer has made a representation or reported an item for tax
      purposes in one year,
      (2) the Commissioner has acquiesced in or relied on that fact for that
      year, and



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      (3) the taxpayer desires to change the representation, previously made,
      in a later year after the statute of limitations on assessments bars
      adjustments for the initial tax year.


       The Hollens argue that their error in thinking the partnership owned the ranch
was one of law, to which the duty of consistency does not apply, citing Herrington
v. C.I.R., 854 F.2d 755, 758 (5th Cir. 1988). Although the Hollens may have made
a legal error in the attempted transfer, the question of who owned the property was,
at best, a mixed question of fact and law, to which the duty of consistency applied.
See id. at 758; LeFever v. C.I.R., 100 F.3d 778, 786 (10th Cir. 1996).

       Our affirmance of the tax court’s ruling that the Hollens do owe taxes
forecloses their argument is that because they owe no tax, no additions should have
been assessed. Their contention that Hollen, P.C. reported the gain on its return for
fiscal year November 1, 1988-October 31, 1989, fails for want of proof, for, as the tax
court noted, that return was not placed in evidence.

      The judgment is affirmed. See 8th Cir. R. 47B.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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