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Enters., the statutes at issue provided that “The Secretary shall
prescribe such regulations as may be necessary or appropriate”.
See secs. 469(l), 865(j)(1), 2663, 7701(f). Thus, these cases
are distinguishable from petitioner’s because of the permissive
nature of the grants of regulatory authority.
The majority rely on Estate of Maddox, First Chicago, and
Occidental, for the proposition that the Secretary’s failure to
promulgate regulations as directed by Congress cannot prevent the
application of a statute which confers a benefit on taxpayers.
The majority’s reliance on these cases is misplaced for two
reasons. First, section 931 provides an exclusion for income
sourced in, or effectively connected to, American Samoa, but such
income is subject to taxation in American Samoa. See TRA 1986
sec. 1271(a), 100 Stat. 2593. Any tax reduction that may result
from the interplay between the two tax systems was not intended
by Congress. Thus, an exclusion from U.S. taxes pursuant to
1(...continued)
Without regulations to determine the scope of the exclusion, we
are unable to discern “whether” or “how” sec. 931 relates to
petitioner. Thus, the “whether” versus “how” test is not useful.
The regulatory grant of authority in sec. 931(d)(2), unlike the
grant of authority in previous cases holding that the “how” prong
of the test was applicable, explicitly provides that “whether
income is described in paragraph (1) or (2) of subsection (a)
shall be made under regulations prescribed by the
Secretary.”(Emphasis added.) In addition, the grant of authority
at issue in Estate of Neumann v. Commissioner, supra at 218,
directed the Secretary to draft regulations “consistent with the
principles of chapters 11 and 12”, thus giving the Court a
foundation for its conclusion. See sec. 2663(2).
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