- 192 -
The Service had not, prior to the issuance of Rev. Rul. 87-
89, supra, issued a revenue ruling in which, under the substance
over form doctrine, it treated a bank involved in a back-to-back
loan transaction as a conduit for withholding tax purposes even
though it was engaged in commercial banking and was not con-
trolled by the other persons involved in that transaction. How-
ever, the Service's failure to do so does not indicate that it
believed that the then existing law precluded such treatment.
The Service is under no duty to announce its position on a parti-
cular issue as soon as the law authorizes that position. See
Dickman v. Commissioner, 465 U.S. 330, 343 (1984).
At worst, the absence of any public announcement by the
Service that specifically addressed its position on the treatment
for withholding tax purposes of such a bank involved in a back-
to-back loan transaction may simply have indicated the Service's
view that the law with respect to such treatment was unsettled
prior to the issuance of Rev. Rul. 87-89, supra. However, as was
made clear in Anderson Clayton & Co. v. United States, 562 F.2d
at 985 n.30 (quoting Davis, Administrative Law Text, sec. 5.05,
at 135 (3d ed. 1972)): "It is retroactive change of settled law,
not retroactive settling of unsettled law, which may produce
unjust results." The retroactive application of an interpre-
tation of unsettled law, whether by ruling or regulation, is not
an abuse of discretion. See id. at 981-982; Chock Full O' Nuts
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