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preclude the determination of appropriate income or deductions
for a taxpayer whose period for assessment remained open.7
Petitioner’s argument also raises the adjunct question of
whether respondent’s inability to make adjustments to
nonshareholders of the borrowing entities has any effect on the
application of section 7872. With respect to these questions,
the statutory language applying section 7872 directly or
indirectly to loans or to any shareholder does appear to answer
questions of whether the statute applies to indirect loans
involving nonshareholders. This is a situation where the
issuance of final regulations might have been helpful to address
the tax effect of the below-market loans on the recipients, but
the taxability with respect to the lender is adequately set out
in the statute.
Because section 7872 is to be applied to a loan made
“directly or indirectly” between a corporation and any
shareholder of the corporation, we find the ordering approach
used in the proposed regulations to be an effective way to
address the issue we consider here. Under the proposed
7 The record does not reveal whether respondent made
“consistent” or any determinations with respect to shareholders
or nonshareholders or whether respondent is currently limited in
his ability to do so. Petitioner merely argues, in the abstract,
that respondent should not be permitted to make the determination
in this case without making one for the shareholders or perhaps
others. If respondent has not already done so, we do not believe
that petitioner’s shareholders are inviting respondent to make
deficiency determinations against them under sec. 7872.
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