with the benefit of hindsight could shift from one basis of depletion to another in light of developments subsequent to their original choice. It seems clear that Congress provided that the election must be made once and for all in the first return to avoid any such shifts.")
Although there is a "binding election" rule as set forth in the cases cited by the Government, the body of case law comprised of Mamula, Silver Queen, supra, as cited by the plaintiff, distinguishes the "binding election" rule. See supra at 1166-1167. After careful review and consideration, this court concludes that the case sub judice falls within that line of case cited by the plaintiff. This court finds that plaintiffs cannot be held to have made a binding irrevocable election by having erroneously and in good faith claimed the investment tax credit themselves.
The Bernsteins' "election" to claim the investment tax credit Personally was an impermissible choice and therefore, they cannot be considered to have made a binding election. As often stated, a taxpayer may not attempt to use hindsight to reap the benefit of a more advantageous tax provision. That, however, is not the case here.
B. Abuse of Discretion
Ordinarily, the holding that plaintiffs' did not make a binding election would end the analysis. Under the precise set of facts presented in this case, however, this court finds that even if plaintiffs' decision to claim the tax credit personally would constitute a "binding election," the Commissioner abused his discretion in refusing to allow plaintiffs to amend their return.
As a preliminary matter to the discretion issue, the court must consider the Government's argument that Treasury Regulation section 1.48-4, a legislative regulation the Government asserts has the force and effect of law, specifically precludes an amendment by plaintiffs. This is so, the Government contends, because the Bernsteins failed "to comply strictly with the timing and manner of election prescribed by regulation [which] precludes the grant of the requested relief, since to grant the relief would allow them the benefit of hindsight." Brief in Support of Defendant's Motion for Summary Judgment, Document 19 of the Record at 16. The court does not agree.
Section 48(b)(1) of the Code provides that under certain conditions a lessor of section 38 property may elect to pass through the investment tax credit to the lessee. The express language of the statute provides that a lessor may elect to pass through the investment "at such time, in such manner, and subject to such conditions as are provided by regulations prescribed by the Secretary." 26 U.S.C. § 48(b)(1). The regulations promulgated pursuant to section 48 provide that in order for a lessor to pass through the investment credit, a statement of election must be filed with the lessee on or before the due date of the lessee's income tax return. Treas. Reg. § 1.48-4(a)(iv); (f)(2). Thus, the Government argues that the Bernsteins are foreclosed from passing through the credit because they did not file a statement to that effect on January 15, 1981 Maid-Rite's income tax return due date.
Inasmuch as the Internal Revenue Service has held that a lessor may make a nunc pro tunc election to pass through the investment tax credit, the Government's argument that § 1.48-4 Precludes plaintiff's election is not persuasive. "The Commissioner has discretionary authority pursuant to § 1.9100-1 to grant an extension of time for making the election to pass through the investment tax credit to the lessee."Revenue Ruling 79-415. It is difficult to understand how the Government can argue that strict compliance is mandatory when the Commissioner has discretion to waive any time limit. If § 1.48-4 required absolute mandatory compliance, then it would seem that § 1.9100-1 would not apply to investment tax credit situations.
Plaintiffs contend that the Commissioner abused his discretion in refusing to allow plaintiffs to file a nunc pro tunc election. Treas. Reg. § 1.9100-1 provides that the Commissioner "upon good cause shown" may exercise his discretion to grant a reasonable extension of time in which to file an election, provided: (1) the time for making the election or application is not expressly prescribed by the statute; (2) the request for the extension if filed with the Commissioner within a period of time the Commissioner considers reasonable under the circumstances; and (3) it is shown to the Commissioner's satisfaction that granting the extension will not jeopardize the Government's interests. Id.
Revenue Procedure 79-63 concerns application for extensions of time for making an election pursuant to Section 1.9100-1 of the regulations and sets forth some factors to consider in determining whether such extensions will be granted. The following factors generally will be taken into consideration in determining whether under the facts and circumstances of each situation, good cause for granting the extension has been shown and the other requirements of Section 1.9100-1 have been met:
(1) due diligence of the taxpayer . . .