- 17 -
In the instant case, we must do "the best we can" in
applying section 865 and the policy underlying it to a situation
involving a loss realized by a U.S. resident on the sale of
noninventory personal property. Certainly, we are not free to
ignore section 865 simply because the Secretary has delayed
promulgating the appropriate regulations. Occidental Petroleum
Corp. v. Commissioner, supra at 829. In enacting section 865,
Congress determined that "the residence of the seller generally
is the location of much of the underlying activity that generates
income derived from sales of personal property". H. Rept. 99-
426, supra at 360, 1986-3 C.B. (Vol. 2) at 360. Section
865(j)(1) directs the Secretary to promulgate regulations to
carry out the purpose of section 865; i.e., that gains and losses
on the sale of noninventory personal property generally are
sourced at the residence of the seller.
The Explanation of Provisions accompanying the proposed
regulations states that "Section 1.865-2(a) provides the general
rule that stock losses are allocated in the same manner as stock
gains * * *. Thus, stock loss generally is allocated to the
residence of the seller." 61 Fed. Reg. 35697 (July 8, 1996)
(emphasis added). Moreover, the proposed regulations, if adopted
in their current form, would source petitioner's Paty stock loss
at the residence of the seller; i.e., in the United States. See
sec. 1.865-2(a)(1), (e)(2)(i), Proposed Income Tax Regs., 61 Fed.
Reg. 35696, 35697-35700 (July 8, 1996).
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