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actions, nor the silent proposed regulations themselves,
constituted the necessary public announcement of the
Commissioner’s change of position from the temporary regulations.
Prior to the issuance of the 1994 final regulations,
taxpayers could not know (or, as explained below, even infer)
that the Commissioner had changed his interpretation of section
469 and the recharacterization rule. Although this delay did not
render the 1994 final regulations invalid, the standards of
fairness developed by this Court require that we interpret the
silence of the 1992 proposed regulations as preserving the
interpretation of the statute previously promulgated in both sets
of temporary regulations. Once that silence is so interpreted,
the transitional rule of the 1994 final regulations can perform
its relief-providing function, and protect taxpayers from the
unannounced and unanticipated change those regulations made to
the Commissioner’s prior interpretations of the law.
In reaching this conclusion, I’m not suggesting that the
Commissioner lacked the power to prescribe a final regulation
that would have applied the new activity definition
retroactively.10 As we concluded in Schwalbach, the
10 See sec. 7805(b) (the Secretary may prescribe the extent,
if any, to which a regulation shall be applied without
retroactive effect); Automobile Club of Michigan v. Commissioner,
353 U.S. 180, 184 (1957) (Commissioner may correct any regulation
retroactively, but also has discretion to limit retroactivity to
avoid inequitable results); cf. sec. 7805(b) as in effect for
regulations relating to statutory provisions enacted after July
(continued...)
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