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the position that an individual’s activities could include
activities conducted through a C corporation.”
I agree that the Commissioner is entitled to change his
mind; we so decided in Schwalbach. However, under the
circumstances of this case, where the Commissioner had issued two
sets of temporary regulations taking a position favorable to
taxpayers (and petitioners), the standards of fairness developed
by this Court (discussed in more detail below) require that the
Commissioner publicly announce his change of position, before the
new position can take effect. See Georgia Fed. Bank v.
Commissioner, 98 T.C. 105, 110 (1992), where we stated that an
agency that changes its position must acknowledge that its
interpretation has shifted and must supply a persuasively
reasoned explanation for the change. See also Gottesman & Co. v.
Commissioner, 77 T.C. 1149 (1981), and Corn Belt Hatcheries of
Arkansas, Inc. v. Commissioner, 52 T.C. 636 (1969) (discussed
infra pp. 48-50), where we decided that taxpayers were entitled
to rely on withdrawn or unclarified guidance from the
Commissioner, until the Commissioner publicly announced his new
or clarified position.
Against this background, the proper interpretation of the
“silent” 1992 proposed regulations becomes vitally important.
Although the Commissioner allowed the relevant portions of the
1988 and 1989 temporary regulations to “sunset” in 1992 and
replaced them with the 1992 proposed regulations, neither these
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