3 year avg. return

What is the name of your state? Florida

I was told that one time in your life , you can file a return and use the last 3 yr average income as your income, TRUE OR FALSE AND PLEASE TELL ME WHY

False, although there is a kernal of truth if you are a fisherman or farmer.

I took advantage of income averaging when I first started working full time, but that was a long time ago and is no longer available (except farmers & fishermen).

Maybe you are thinking of the pension reform act that allows even people not eligible for IRA to Roth IRA conversions to do that in 2010 and spread the tax for the conversion over a period of 3 years.