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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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