Michael F. & Jane H. Connor - Page 7




                                        - 7 -                                         
          specifically disavow the rule of nonattribution as stated in the            
          first set of regulations means that the nonattribution rule                 
          continued to apply up until the time that the Commissioner issued           
          the third set of regulations which provided explicitly that "A              
          taxpayer's activities include those conducted through C                     
          corporations that are subject to section 469".  Sec. 1.469-4(a),            
          Income Tax Regs.                                                            
               We disagree with petitioners' assertion that Dr. Connor                
          cannot be a material participant of the dental activity of his              
          personal service corporation in a taxable year for which the                
          effective date and transition rules apply.  In Schwalbach v.                
          Commissioner, supra, a setting strikingly similar to the setting            
          at hand, the taxpayers argued similarly that the effective date             
          and transition rules of section 1.469-11(b)(1), Income Tax Regs.,           
          coupled with no mention of attribution in the second set of                 
          regulations, allowed them to apply a nonattribution rule similar            
          to that appearing in the first set of regulations.  We disagreed.           
          See id. at 230.  Petitioners' attempt to dismiss as dicta our               
          quick disposition of that issue is unavailing.  That the                    
          taxpayers in Schwalbach could not escape the moorings of the                
          attribution rule flowed naturally from our discussion of the                
          primary issue.  As we had observed, an attribution rule appears             
          in the third set of regulations, the preamble to those                      
          regulations clarifies that the silence as to attribution in the             
          second set of regulations indicates that attribution was meant to           




Page:  Previous  1  2  3  4  5  6  7  8  9  Next

Last modified: May 25, 2011