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self-charged items are not specifically mentioned in the statute,
we have little difficulty placing self-charged items within the
ambit of section 469(l)(1) and (2). Through the legislative
commentary, the Secretary was directed to issue regulations for
self-charged lending transactions. The Secretary, by following
that direction and issuing section 1.469-7, Proposed Income Tax
Regs., 56 Fed. Reg. 14034 (Apr. 5, 1991), acknowledges that the
mandate of section 469(l)(2) includes self-charged items. Under
those circumstances, it is more difficult to accept respondent’s
position that the Secretary’s failure to issue regulations is a
bar to a taxpayer’s claiming that nonlending self-charged
transactions may also be offset. Respondent’s position would
ring more true, but not necessarily more correct, if no
regulations at all regarding self-charged items had been issued.
Having decided that the absence of regulations here is not
an acceptable basis for respondent’s determination, we turn to
the provision in question to determine whether petitioners are
entitled to self-charged treatment for the management fee income
and deductions. Petitioner received nonpassive income, through
SMC, for SMC’s providing real estate management services for the
partnerships (in which petitioner had an ownership interest,
either directly or indirectly). In connection with these real
estate management services, petitioner was also entitled to a
deduction for his distributive share of the management fees
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