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Petitioners argue that Nolte relies on interpretive section
1.165-13T, Q&A-3, Temporary Income Tax Regs., supra, for the
proposition that DEFRA section 108(c) allows the offset of
disallowed losses only against subsequent gains. Petitioners
contend that the holding in Nolte is incorrect for two reasons.
First, petitioners believe that section 1.165-13T, Q&A-3,
Temporary Income Tax Regs., supra, does not imply that disallowed
losses may only offset subsequent gains. Second, section
1.165-13T, Q&A-3, Temporary Income Tax Regs., supra, is invalid
to the extent that it implies a contrary result to the plain
language of DEFRA section 108(c). Petitioners cite Jackson
Family Foundation v. Commissioner, 15 F.3d 917 (9th Cir. 1994),
affg. 97 T.C. 534 (1991), to support the position that an
interpretive regulation is not followed when it "fails to
'implement the congressional mandate in a reasonable manner.'"
Id. at 920 (citing Pacific First Fed. Sav. Bank v. Commissioner,
961 F.2d 800, 803 (9th Cir. 1992), revg. 94 T.C. 101 (1990)
(quoting National Muffler Dealers Association v. United States,
440 U.S. 472, 476 (1979))). We disagree with petitioners'
position.
Petitioners incorrectly contend that section 1.165-13T,
Q&A-3, Temporary Income Tax Regs., supra, does not imply that
disallowed losses may only offset subsequent gains. The plain
language of the regulations states that result. Section
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