Rountree Cotton Co. - Page 11




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          1.7872-1 through 1.7872-13, Proposed Income Tax Regs., 50 Fed.              
          Reg. 33556-33569 (Aug. 20, 1985).  The Commissioner also                    
          published one temporary regulation.  See sec. 1.7872-5T,                    
          Temporary Income Tax Regs., 50 Fed. Reg. 33521 (Aug. 20, 1985).             
          Petitioner contends that the proposed regulations do not have the           
          force and effect of law and are not to be given any more                    
          deference than respondent’s litigating position, citing KTA-                
          Tator, Inc. v. Commissioner, supra at 102-103.                              
               The proposed regulations did provide taxpayers with guidance           
          as to the Commissioner’s section 7872 position regarding certain            
          aspects of the issues in this case and the broad areas Congress             
          mandated for legislative regulations.  We note that the proposed            
          and temporary regulations were published substantially in advance           
          of the making of the loans in question.  In that regard, the                
          Commissioner’s proposed and temporary regulations contain                   
          exemptions from section 7872, de minimis rules, and                         
          interpretations and rules regarding below-market loans.  The                
          proposed and temporary regulations are generally unfavorable to             
          petitioner’s position.  Accordingly, if the Commissioner had                
          converted the proposed regulations to final or permanent status,            
          it would not have been beneficial to petitioner or its                      
          shareholders.                                                               
               Respondent has scrupulously avoided reliance upon or                   
          reference to the proposed regulations.  In response to                      






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