Unionbancal Corporation - Page 31




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              Section 7805(b) “sets out a blanket rule which specifically             
         permits the Commissioner to prescribe prospective effect to                  
         regulations which would otherwise have retroactive application.”             
         Wendland v. Commissioner, 79 T.C. 355, 381-382 (1982), affd. 739             
         F.2d 580 (11th Cir. 1984), also affd. sub nom. Redhouse v.                   
         Commissioner, 728 F.2d 1249 (9th Cir. 1984).  Under section                  
         7805(b), there is a presumption that every regulation will                   
         operate retroactively, unless the Secretary specifies otherwise.             
         See Manocchio v. Commissioner, 710 F.2d 1400, 1403 (9th Cir.                 
         1983), affg. 78 T.C. 989 (1982); Butka v. Commissioner, 91 T.C.              
         110, 129 (1988), affd. 886 F.2d 442 (D.C. Cir. 1989).  In the                
         instant case, the Secretary did specify otherwise and, in doing              
         so, clearly acted within his authority.  See Butka v.                        
         Commissioner, supra at 129 (“Section 7805(b) certainly gives [the            
         Secretary] authority to provide, if he so chooses, that the new              
         regulation will operate only prospectively”).                                
              Petitioner argues that respondent’s exercise of his                     
         authority to issue prospective regulations, being discretionary,             
         is reviewable for abuse of discretion.  Petitioner states on                 
         brief:                                                                       
              Petitioner submits that when retroactive application of a               
              regulation would not have inequitable results, Respondent               
              does not have the authority to limit retroactivity.                     
              Congress only gave Respondent the discretion to prevent                 
              retroactivity to the extent required in order to avoid undue            
              hardship or discrimination.                                             






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