- 17 -
be prorated between them. See sec. 1.861-8(e)(7)(ii), Income Tax
Regs., supra pp. 11-12.
Finally, this is not a case where respondent's determination
conflicts with the regulations, see, e.g., Woods Investment Co.
v. Commissioner, 85 T.C. 274 (1985), nor is it a case where the
regulations are found to conflict with the statute, see, e.g.,
Jackson Family Foundation v. Commissioner, 97 T.C. 534 (1991),
affd. 15 F.3d 917 (9th Cir. 1994). This is a case where the
Secretary's regulations do not adequately deal with a problem.
In such a situation, it is our task to construct the best
solution we can. Cf. First Chicago Corp. v. Commissioner, 88
T.C. 663, 676 (1987), affd. 842 F.2d 180 (7th Cir. 1988).
In sum, respondent takes into account the fact that the loan
assets produced income in both groupings, whereas petitioner does
not. Such being the case, we approve of respondent's method of
allocating and apportioning interest expenses because it better
fits the facts and constitutes the more reasonable interpretation
of the statute and the regulations. Cf. Occidental Petroleum
Corp. v. Commissioner, supra. At least, petitioner, who has the
burden of proof, Rule 142(a),8 has not convinced us that its
allocation method is more reasonable than that of respondent.
8 That burden is not lessened in a fully stipulated case.
Borchers v. Commissioner, 95 T.C. 82, 91 (1990), affd. 943 F.2d
22 (8th Cir. 1991).
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