Stephen and Ann Schwalbach - Page 17

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          claim, the attribution rule set forth in section 1.469-4(a),                
          Income Tax Regs., is a substantial change from the rules set                
          forth in the proposed regulations, which, petitioners allege,               
          means that the Commissioner should have given notice and allowed            
          comment on the attribution rule pursuant to the APA, 5 U.S.C.               
          sec. 553(b) and (c) (1994).  Because the Commissioner did not,              
          petitioners conclude, the attribution rule of section 1.469-4(a),           
          Income Tax Regs., is invalid, which, in turn, invalidates the               
          recharacterization rule of section 1.469-2(f)(6), Income Tax                
          Regs., to the extent that it attributes the activities of a C               
          corporation to an individual who materially participates in that            
               We disagree with petitioners' assertion that sections                  
          1.469-2(f)(6) and 1.469-4(a), Income Tax Regs., are invalid as              
          applied in the instant case.  With respect to section                       
          1.469-2(f)(6), Income Tax Regs., and section 469 in general, the            
          uncertainty as to the breadth of a provision does not mean that             
          it is inoperative until regulations are issued clarifying the               
          breadth of it.  See SEC v. Chenery Corp., 332 U.S. 194, 201-203             
          (1947); Jacks v. Crabtree, 114 F.3d 983, 985-986 (9th Cir. 1997);           
          Trans City Life Ins. Co. v. Commissioner, 106 T.C. 274, 299-300             
          (1996).  In the absence of regulations, a provision may be                  
          interpreted in light of all pertinent evidence, textual and                 
          contextual, of its meaning.  See Commissioner v. Soliman,                   
          506 U.S. 168, 174 (1993); Crane v. Commissioner, 331 U.S. 1, 6-7            

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