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1988 and 1989 temporary regulations; the 1994 final regulations,
although different from the temporary and proposed regulations,
were therefore valid. However, taxpayers could not have
concluded, on the basis of the silence of the 1992 proposed
regulations, that the Commissioner had in fact changed that rule.
Our cases interpreting another large and detailed set of
legislative regulations-–the consolidated return regulations–-
provide another example of how the standards of fairness instruct
us to interpret the Commissioner’s silence in the case at hand.
We have held that the Commissioner is bound by the consequences
flowing from the silence (or the express terms) of the
consolidated return regulations, even when those consequences are
arguably at odds with larger tax principles or the statute as a
whole. See Woods Inv. Co. v. Commissioner, 85 T.C. 274 (1985)
(literal application of consolidated return regulations binding,
even though result was allegedly a double deduction for the
taxpayer); Gottesman & Co. v. Commissioner, 77 T.C. 1149 (1981)
(refusal to “fill in the gaps” regarding imposition of
accumulated earnings tax on corporations filing consolidated
returns).
Our opinion in Gottesman & Co. v. Commissioner, supra, is
particularly instructive. Gottesman & Co. also considered the
effect of the Commissioner’s silence, following the withdrawal of
regulations favorable to the taxpayer. In Gottesman & Co., we
considered whether the taxpayer (the common parent of an
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