- 51 -
Conclusion
Notwithstanding the majority’s belated resort to “plain
meaning”, section 469 is a technical and complicated statute.
The regulations promulgated under that section have been detailed
and voluminous; they have also changed significantly over time.
19(...continued)
corporation activities under the 1992 proposed regulations.
Personal service corporations and closely held C corporations are
themselves subject to the passive loss rules. See sec.
469(a)(2)(B) and (C). Sec. 1.469-1T(g)(3), Temporary Income Tax
Regs., 53 Fed. Reg. 5707-5708 (Feb. 25, 1988) determines when
such corporations will be considered to participate in their own
activities. Sec. 1.469-1T(g)(3)(iii), Temporary Income Tax
Regs., supra, provides that for this purpose, the general
participation definition of sec. 1.469-5T, Temporary Income Tax
Regs., shall apply, except that individuals shall be treated as
holding an interest in all corporate activities.
This special participation definition was first promulgated
as part of the 1988 temporary regulations (see sec. 1.469-
1T(g)(3)(iii), Temporary Income Tax Regs., supra. It was an
exception to the general participation definition of those 1988
temporary regulations, which expressly provided that a
shareholder did not participate in C corporation activities. See
supra pp. 30-32.
The Commissioner did not amend or remove the special
participation definition of sec. 1.469-1T(g)(3)(iii), Temporary
Income Tax Regs., supra, when he promulgated the 1992 proposed
regulations. See T.D. 8417, 1992-1 C.B. 173, 57 Fed. Reg. 20747
(May 15, 1992) (certain temporary passive loss regulations
amended or adopted as final regulations); Notice of Proposed
Rulemaking, PS-1-89, 1992-1 C.B. 1219, 57 Fed. Reg. 20802 (May
15, 1992) (the 1992 proposed regulations). Because the special
definition would not be necessary if shareholders generally
participated in C corporation activities, the Commissioner’s
failure to remove that definition when he promulgated the 1992
proposed regulations further suggests that shareholders did not
generally participate in C corporation activities under those
regulations.
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