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not participate in C corporation activities; the 1994 final
regulations expressly provide that shareholders do so
participate. The 1992 proposed regulations said nothing about
this issue.
The 1994 final regulations generally apply to 1994. See
sec. 1.469-11(a)(1), Income Tax Regs. (sec. 1.469-4, Income Tax
Regs., applies for taxable years ending after May 10, 1992).
However, taxpayers may choose to apply the 1992 proposed
regulations, rather than the 1994 final regulations, to determine
tax liability for years ending after May 10, 1992 and beginning
before October 4, 1994. See sec. 1.469-11(b)(1), Income Tax
Regs.
The parties agree that the 1992 proposed regulations apply
to this case.
VI. We Need Not Infer that Shareholders Participate in
C Corporation Activities Under the 1992 Proposed
Regulations
The majority conclude (as respondent argued) that the
silence of the 1992 proposed regulations must be interpreted as
allowing shareholder participation in C corporation activities.
According to the majority (and respondent), because the 1992
proposed regulations do not contain the express nonparticipation
rule of the temporary regulations, it must be inferred that the
Commissioner did not intend to continue that rule in the 1992
proposed regulations. The majority conclude that it must be
inferred further that shareholders participate in C corporation
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