- 21 -
computing CTI as used during the taxable year for which CTI is
being computed. Sec. 1.994-1(c)(6)(i), Income Tax Regs.
The term "total costs" is ambiguous and does not delineate
whether the "total" is for the year, as petitioners contend, or
all costs relating to the gross receipts, including those
incurred and deducted in a prior year. Accordingly, petitioners
and respondent are both placed in the position of advancing, for
purposes of this litigation, their respective interpretations of
the language of the regulation.
Normally, we defer to regulations which “implement the
congressional mandate in some reasonable manner.” United States
v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982) (quoting United
States v. Correll, 389 U.S. 299, 307 (1967)); Rowan Cos., Inc. v.
United States, 452 U.S. 247, 252 (1981); National Muffler Dealers
Association, Inc. v. United States, 440 U.S. 472, 476 (1979).7
7 The deference given to a regulation depends on the source
of authority under which the Secretary promulgated it. Less
deference is given to a regulation promulgated under the general
authority of sec. 7805(a), an interpretative regulation, and
greater deference to a regulation promulgated under a specific
statutory grant of authority, a legislative regulation. United
States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982).
Pursuant to sec. 994(b)(1), the Secretary issued sec. 1.994-
1(d), Income Tax Regs., which subjects commission DISC’s to the
pricing rules set forth in sec. 994(a). See sec. 1.925(a)-1T(d),
Temporary Income Tax Regs., 52 Fed. Reg. 6447 (Mar. 3, 1987).
Sec. 1.994-1(d)(2), Income Tax Regs., refers to par. (c) of that
regulation for the proper method to apply the pricing rules.
However, that reference may not automatically make par. (c) a
legislative regulation when applied to commission DISC’s.
Congress did not specifically grant the Secretary authority to
promulgate regulations with regard to buy-sell DISC’s.
(continued...)
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011