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charged interest in accordance with the congressional mandate.6
Here, we are faced with the unusual situation where the Secretary
has promulgated regulations dealing with some, but not all, of
the issues intended and/or anticipated by Congress. Congress
anticipated the Secretary would issue regulations regarding self-
charged treatment in situations where, with respect to payment to
a taxpayer by an entity in which the taxpayer has an ownership
interest, netting would be appropriate. The Secretary, however,
addressed only self-charged interest in proposed regulations.
Had self-charged nonlending transactions been addressed in
regulations, respondent’s regulatory position would have been
afforded greater deference than as a litigating position.7 See
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984). Under Chevron, legislative regulations are
entitled to the highest level of judicial deference. See id. at
843-844. This deference, however, does not extend to a
litigating position taken by an administrative agency.
6 There is some question as to whether a proposed regulation
is susceptible to “invalidation”. Fortunately, this question
need not be addressed at this time.
7 In light of the legislative history, it is difficult to
imagine the issuance of regulations denying self-charged
treatment for appropriate nonlending situations. Respondent does
not argue here that petitioners’ situation is inappropriate.
Instead, respondent contends that the failure to address
nonlending situations in the regulations results in taxpayers not
being enabled to offset items other that the lending transactions
covered in the proposed regulation.
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