Unionbancal Corporation - Page 12

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         it leaves the controlled group, even if the loss property has not            
         been disposed of outside the controlled group.  See secs.                    
         1.267(f)-1(a)(2), 1.1502-13(f)(1)(iii), Income Tax Regs.                     
              Petitioner challenges the validity of the Loss Restoration              
         Exception.  Petitioner asserts that the Temporary Regulation                 
         violates the plain meaning and intent of section 267(f) by                   
         effectively denying it the deferred loss on its 1984 loan                    
         portfolio sale.  In addition, petitioner argues that the                     
         Temporary Regulation violates the U.S. income tax treaty with the            
         United Kingdom.  See The Convention between the Government of the            
         United States of America and the Government of the United Kingdom            
         of Great Britain and Northern Ireland for the Avoidance of Double            
         Taxation and the Prevention of Fiscal Evasion with respect to                
         Taxes on Income and Capital Gains, Dec. 31, 1975, U.S.-U.K., 31              
         U.S.T. 5668 (hereinafter U.S.-U.K. treaty).  Finally, petitioner             
         argues that respondent's refusal to allow it to elect retroactive            
         application of the Final Regulation is not authorized by section             
         I.  Validity of the Temporary Regulation                                     
              A.  Standard of Review                                                  
              A legislative regulation “is entitled to greater deference              
         than an interpretive regulation, which is promulgated under the              
         general rulemaking power vested in the Secretary by section                  
         7805(a).”  Romann v. Commissioner, 111 T.C. 273, 281 (1998); see             

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