Document Type


Publication Date

Summer 1991

Publication Title

Tax Law Review

Publication Title (Abbreviation)

Tax L. Rev.





First Page


Last Page



A transaction may affect the taxpayer's federal tax liability for both the current period and subsequent periods. No difficulty arises if the taxpayer treats the transaction consistently over the periods. However, significant tax distortions are possible if the taxpayer's characterization of the transaction varies from period to period. A recharacterization may be particularly troublesome if the statute of limitations has expired, and the first period is not open to correction at the time the inconsistent representation is made.

The duty of consistency was developed to address this problem. If the duty applies, the taxpayer is not permitted to shift his position in the subsequent period regardless of whether, as a matter of substantive tax law, the position taken in the prior period was correct. A hallmark of the duty is flexibility. It has been applied to prevent taxpayers from taking inconsistent positions in order to exclude from all tax periods income that clearly is taxable in some period, deduct the same expense in two or more periods, improperly inflate the basis of an asset, convert one type of income into a different, tax-favored type and profit from other sorts of tax abuses.

There have been, however, differences among the courts in their perception of the duty of consistency. As Justice Frankfurter rightly observed, consistency decisions “disclose many views in various degrees of conflict.”

This article attempts to clarify this aspect of the procedural tax law. Section II sketches the emergence of the taxpayer duty of consistency, and describes current formulations. The remaining three sections address the major controversies surrounding the duty. Section III asks whether there should be an enforceable taxpayer duty of consistency, and resolves that question in the affirmative. In so doing, it proposes that the justification for the duty of consistency should be grounded in practical policy values fundamental to our tax system rather than the essentially moralistic basis of prior decisions. Section IV describes the proposed elements of the duty of consistency. Section V charts the relationships between the duty of consistency and other anticonsistency doctrines. The final section offers guidelines for determining when the duty of consistency should yield to other devices used to counter inconsistency and when the duty of consistency should preempt the other devices.


© 1991 Steve R. Johnson


First published in Tax Law Review.

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