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what is meant by “consistency” between the lender and the
borrower.
In section 7872(h)(1)(B), the Secretary was mandated to
prescribe “regulations for the purpose of assuring that the
positions of the borrower and lender are consistent as to the
application (or nonapplication) of this section”. We do not read
that language as requiring regulations that provide for
correlative or numerically corresponding adjustments between a
lender and a borrower. We understand that language to call for
regulations that ensure that both parties to the transaction
would or would not be subject to the effect of section 7872. So,
for example, if it were determined that an employer made a below-
market loan to a nonshareholder employee under section 7872, to
be consistent, the Commissioner would be required to consistently
treat both the employee and the employer as subject to the
provisions of section 7872. Treating them consistently may
require the Commissioner to permit appropriate deductions to a
party to a loan transaction as though the interest had actually
been paid. If, however, the Commissioner was barred from
treating one of the parties to the loan consistently because of
the expiration of the period for assessment, that would not
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