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Section 7701(f) provides:
SEC. 7701(f) Use of Related Persons or Pass-Thru
Entities.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to
prevent the avoidance of those provisions of this title
which deal with--
(1) the linking of borrowing to investment, or
(2) diminishing risks,
through the use of related persons, pass-thru entities,
or other intermediaries. [Emphasis added.]
Reviewing the analyses and conclusions of Occidental
Petroleum Corp. v. Commissioner, supra, First Chicago Corp. v.
Commissioner, supra, and Alexander v. Commissioner, supra, we
held that the issuance of regulations under section 7701(f) was
not a precondition to applying sections 246A and 265(a)(2) to
transactions involving a parent corporation and its subsidiary.
In so holding, we followed Occidental Petroleum and First Chicago
and distinguished Alexander on the ground that the "only to the
extent" language of section 465(c)(3)(D) was absent from section
7701(f). See H. Enters. Intl., Inc. v. Commissioner, supra at
81-84. In short, the teaching of the decided cases is that
issuance of regulations is to be considered a precondition to the
imposition of a tax where the applicable provision directing the
issuance of such regulations reflects a "whether"
characterization, such as existed in Alexander, and not where the
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Last modified: May 25, 2011