Michael F. & Jane H. Connor - Page 6




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                              (1)  The rules contained in                             
                         � � 1.469-1, 1.469-1T, 1.469-2,                              
                         1.469-2T, 1.469-3, 1.469-3T,                                 
                         1.469-4, 1.469-5, and 1.469-5T                               
                         apply for taxable years ending                               
                         after May 10, 1992.                                          
                              *    *    *    *    *    *    *                         
                         (b)  Additional effective dates--(1)                         
                    Application of 1992 amendments for taxable                        
                    years beginning before October 4, 1994.  * *                      
                    * for taxable years that end after May 10,                        
                    1992, and begin before October 4, 1994, a                         
                    taxpayer may determine tax liability in                           
                    accordance with Project PS-1-89 published at                      
                    1992-1 C.B. 1219 * * *.                                           
          Project PS-1-89, supra, generally contains:  (1) The second set             
          of regulations that the Commissioner issued to define the word              
          "activity", see Schwalbach v. Commissioner, supra at 220-225, for           
          a detailed discussion of the three sets of regulations which the            
          Commissioner issued on that subject, and (2) the effective date             
          rule in section 1.469-11(a)(1), Income Tax Regs.                            
               Petitioners rely on the fact that the second set of                    
          regulations made no mention of attributing the activity of a                
          corporation to a shareholder, see 57 Fed. Reg. 20802 (May 15,               
          1992), and that the first set of regulations provided that "a               
          taxpayer's activities do not include operations that a taxpayer             
          conducts through one or more entities (other than passthrough               
          entities)", see sec. 1.469-4T(b)(2)(ii)(B), Temporary Income Tax            
          Regs., 54 Fed. Reg. 20543 (May 12, 1989).  According to                     
          petitioners, the fact that the second set of regulations did not            






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