                        T.C. Memo. 1999-302



                      UNITED STATES TAX COURT



             DIESEL PERFORMANCE, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5019-98.                Filed September 14, 1999.



     Richard S. Calone and Jason W. Harrel, for petitioner.

     Neal O. Abreu and Christian A. Speck, for respondent.



                        MEMORANDUM OPINION


     PARR, Judge:   Respondent determined deficiencies of $17,822

and $14,506 in petitioner's Federal income taxes for the taxable

years ending June 30, 1994, and June 30, 1995, respectively, and

an accuracy-related penalty of $3,564 under section 6662(a) for

1994.
                                - 2 -


       All section references are to the Internal Revenue Code in

effect for the taxable years in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure, unless

otherwise indicated.

       After concessions,1 the issues for decision are:   (1)

Whether petitioner made a timely election to waive the carryback

period with respect to its net operating loss for its tax year

ending June 30, 1992.    We hold it did not.   (2) Whether the

period of limitations bars the assessment and collection of the

deficiency in income tax for the tax year ending June 30, 1994.

We hold it does not.    (3) Whether the duty of consistency

doctrine, or in the alternative, the theory of equitable

estoppel, applies under these circumstances.     We hold they do

not.

       This case was submitted fully stipulated under Rule 122.

The stipulated facts and the accompanying exhibits are

incorporated herein by this reference.    At the time the petition

in this case was filed, petitioner's principal place of business

was located in Stockton, California.




       1
      Petitioner conceded respondent's determination with respect
to the sec. 481 adjustment for the taxable year ending June 30,
1995. Respondent conceded that the accuracy-related penalty
under sec. 6662(a) does not apply to petitioner for the taxable
year ending June 30, 1994.
                               - 3 -


                            Background

     Diesel Performance, Inc. (Diesel Performance), is a

corporation permitted to do business in California.   It was

incorporated on January 2, 1973.

     For the tax year ending June 30, 1992, petitioner timely

filed its corporate income tax return, Form 1120.   The originally

filed Form 1120 for the tax year ending June 30, 1992, showed a

profit (taxable income) for petitioner.

     Due to accounting errors related to section 263A

adjustments, petitioner's accountant discovered that the original

Form 1120 for the tax year ending June 30, 1992, was incorrect.

After discovering the error, petitioner prepared an amended Form

1120X for the tax year ending June 30, 1992, which was filed on

March 25, 1994.   The Form 1120X, for the first time, showed

petitioner had actually sustained a loss for that period.

Respondent does not dispute the accuracy of the loss reported on

petitioner's Form 1120X for the period ending June 30, 1992.

     On the Form 1120X, petitioner attached a statement which

read:
                               - 4 -


                       ELECTION TO RELINQUISH
                NET OPERATING LOSS CARRYBACK PERIOD

                      DIESEL PERFORMANCE, INC.
                           EIN: XX-XXXXXXX
                              FORM 1120
                  Fiscal Year Ended June 30, 1992

     Taxpayer incurred a net operating loss in its taxable
     year ended June 30, 1992, 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)(C), the taxpayer
     hereby elects to relinquish the entire carryback period
     with respect to the net operating loss incurred in its
     taxable year ended June 30, 1992.

     On petitioner's Form 1120 filed for the tax year ending June

30, 1994, petitioner claimed a reduction in gross income in an

amount representing the net operating loss from the June 30,

1992, period.   In auditing petitioner's June 30, 1994, Form 1120,

respondent disallowed the net operating loss carryover from June

30, 1992, on the grounds petitioner had not included a valid

election to waive the carryback period on a return filed by the

original due date.

     Respondent issued a notice of deficiency for the taxable

year ending June 30, 1994, disallowing $55,769 of the net

operating loss petitioner attempted to carry forward to the June

30, 1994, taxable year.

     On petitioner's original Forms 1120 for the taxable years

ending June 30, 1989, and 1990, petitioner reported net taxable

income of $109,646 and $191,445, respectively.
                               - 5 -


     On petitioner's original Form 1120 for the taxable year

ending June 30, 1991, petitioner reported a loss of $11,877.

Petitioner included with the original return its election to

waive the carryback period for the reported loss.

     On petitioner's amended Form 1120X for the taxable year

ending June 30, 1991 (filed on or about April 20, 1994),

petitioner reported a loss of $79,007.

                            Discussion

     Respondent determined that petitioner did not make a timely

election to waive the carryback period on the amended return for

the tax year ending June 30, 1992.     Petitioner asserts that it

did make a valid election to relinquish the carryback period with

respect to its net operating loss for the tax year ending June

30, 1992.

     In general, section 172 allows a deduction for an amount

equal to the aggregate of the net operating loss carryovers to a

taxable year plus the net operating loss carrybacks to that year.

See sec. 172(a).   Section 172(b), as in effect for the years at

issue, required that a net operating loss first be carried back

to each of the 3 previous taxable years and, if it was unabsorbed

by those years, that the remaining portion be carried forward to

the 15 following taxable years.   See sec. 172(b)(1) and (2).

     Section 172(b)(3), however, provides that a taxpayer may

elect to relinquish the entire carryback period and carry forward
                               - 6 -


the loss to the taxable years following the loss year.   That

section further provides:

          (3) * * * Such election shall be made in such
     manner as may be prescribed by the Secretary, and shall
     be made by the due date (including extensions of time)
     for filing the taxpayer's return for the taxable year
     of the net operating loss for which the election is to
     be in effect. Such election, once made for any taxable
     year, shall be irrevocable for that taxable year.

     The regulations, in accord with the statute, provide that

the "election must be made by the later of the time, including

extensions thereof, prescribed by law for filing income tax

returns for such taxable year or March 8, 1977."   Sec. 7.0(b)(1),

Temporary Income Tax Regs., 42 Fed. Reg. 1469-1470 (Jan. 7,

1977),2 which regulation is entitled Various Elections Under the

Tax Reform Act of 1976.   As to the manner in which the election

is to be effected, section 2, Temporary Income Tax Regs., 42 Fed.

Reg. 1470 (Jan. 7, 1977), provides:

     (d) Manner of making election. Unless otherwise
     provided in the return or in a form accompanying a
     return for the taxable year, the elections described
     * * * 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.



     2
      The regulation was redesignated in 1992 as sec. 301.9100-
12T, Temporary Income Tax Regs., 57 Fed. Reg. 43893 (Sept. 23,
1992).
                               - 7 -


     In Young v. Commissioner, 83 T.C. 831, 840-841 (1984), affd.

783 F.2d 1201 (5th Cir. 1986), this Court concluded that the

taxpayer's "amended return is irrelevant" in determining

substantial compliance with the election requirements.    In

rejecting the taxpayer's argument that section 7.0(d), Temporary

Income Tax Regs., 42 Fed. Reg. 1469 (Jan. 7, 1977), provides that

an election may be made in an amended return, the Court

explained:

     This is true; however, in order to square the
     regulation with the directive of the statute, an
     election made in a subsequently filed return can only
     be effective if the subsequently filed return is filed
     before the due date of the return. [Young v.
     Commissioner, supra at 841 n.9.]

     We accept that petitioner made an honest mistake when filing

its original return for the tax year ending June 30, 1992.

Furthermore, we accept that it attempted to elect to relinquish

the carryback period on its amended return for the tax year

ending June 30, 1992.   The due date, with extensions, of

petitioner's return for the tax year ending June 30, 1992,

however, was March 15, 1993.   Petitioner did not file the amended

return with the election until March 25, 1994.   Therefore,

petitioner did not make a timely election to waive the carryback

period on its amended return for the tax year ending June 30,

1992.   See Young v. Commissioner, supra; Klyce v. Commissioner,

T.C. Memo. 1999-198; Menaged v. Commissioner, T.C. Memo. 1991-79.
                               - 8 -


     Petitioner next argues that the period of limitations under

section 6501 bars the assessment and collection of the deficiency

in income tax for the tax year ending June 30, 1994.

Petitioner's amended return for the tax year ending June 30,

1992, was filed on March 25, 1994.     According to section 6501,

petitioner argues, the period of limitations for the tax year

ending June 30, 1992, expired September 15, 1995.

     An amended return, even if accepted by the IRS, is

considered a mere supplement, and the original return is used for

purposes of determining the period of limitations on assessment.

See Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934).

Therefore, petitioner is correct in that generally the period of

limitations for the tax year ending June 30, 1992, would expire

on September 15, 1995; however, the tax year in issue for which a

deficiency was determined ended on June 30, 1994.    Respondent is

not barred from assessment and collection of a deficiency in

income tax for the tax year ending June 30, 1994, by the period

of limitations.

     Next, petitioner argues that the duty of consistency is

applicable in this case.   We may exercise equitable principles so

that the duty of consistency applies in this Court, see LeFever

v. Commissioner, 103 T.C. 525, 541 (1994), affd. 100 F.3d 778

(10th Cir. 1996); however, it does not apply to the facts of this

case.     The duty of consistency doctrine prevents a taxpayer
                                 - 9 -


from taking a position one year, and then a contrary position in

a later year after the period of limitations has expired on the

first year.   See id. at 541-542; see also United States v.

Matheson, 532 F.2d 809, 819 (2d Cir. 1976)(estate estopped to

deny decedent's U.S. citizenship after she represented to the

U.S. Government for a period of more than 20 years that she was a

citizen of the United States).    Petitioner argues that under

certain circumstances, the duty of consistency may also apply to

the Commissioner.   See, e.g., Conway Import Co. v. United States,

311 F. Supp. 5, 14-15 (E.D.N.Y. 1969)(Commissioner estopped to

apply ruling retroactively to recordkeeping system that had been

substantially accepted for a long period of time and reviewed by

many agents at different levels of authority).   This type of

situation is not present here.    Petitioner made an honest mistake

in preparing a return, which respondent discovered on audit.     The

duty of consistency does not apply against respondent.

     Although petitioner argues the duty of consistency applies,

petitioner also mentions equitable estoppel and argues on brief

that respondent was not timely in reviewing the invalid election,

and thereby "provided a wrongful misleading silence upon which

the taxpayer relied".   To invoke estoppel against the Government,

the party seeking estoppel must show at a minimum:   (1) The

existence of a false representation or wrongful misleading

silence by the other party; (2) ignorance of the facts; (3)
                              - 10 -


reasonable reliance on the false representation or wrongful

misleading silence of the other party; (4) error in a statement

of facts and not in an opinion or statement of law; and (5) a

resulting detriment to the party relying on the false statement

or misleading silence.   See Garland v. Commissioner, T.C. Memo.

1993-190.   Petitioner has not proven any of the elements of

equitable estoppel.

     For the foregoing reasons,

                                         Decision will be entered

                                    under Rule 155.
