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B. Petitioner's Abuse of Discretion Claims
1. Petitioner's Claim That Rev. Rul. 87-89
Should Not Be Applied Retroactively
Petitioner contends that respondent's retroactive applica-
tion of Rev. Rul. 87-89, supra, to taxpayers generally, including
specifically Radcliffe and BOT, constituted an abuse of discre-
tion, that is to say, the Commissioner's decision not to exercise
the discretion provided by section 7805(b) to limit the retroac-
tive effect of that ruling was an abuse of that discretion.142
See Automobile Club of Michigan v. Commissioner, 353 U.S. 180,
185 (1957); Becker v. Commissioner, 85 T.C. 291, 294 (1985). As
we understand the thrust of petitioner's contention, the Commis-
sioner changed settled law on which taxpayers had relied when,
with no prior notice to the public, the Service held, inter alia,
in Rev. Rul. 87-89, supra, that a bank engaged in commercial
banking and not controlled by either the borrower or the purport-
ed lender in a back-to-back loan transaction could be treated as
a conduit for withholding tax purposes.
Respondent disputes petitioner's contention that Rev. Rul.
87-89, supra, changed settled law. She points out that the
substance over form doctrine on which Rev. Rul. 87-89, supra, is
142 We note that petitioner's claim that respondent abused her
discretion appears to be inconsistent with his constitutional
claim that, despite respondent's general administrative practice
of applying Rev. Rul. 87-89, 1987-2 C.B. 195, on a prospective
basis only, that ruling was applied retroactively to the Bank
transactions. In any event, we addressed and rejected above
petitioner's constitutional claim.
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