- 43 -
We conclude that section 163(h)(2)(A) is silent or
ambiguous. We now proceed to the second prong of our analysis;
i.e., whether the regulations in issue are based on permissible
constructions of section 163(h)(2)(A).
(3) Permissible Construction
To be valid, a regulation need not be the only, or even the
best, construction of the statute it purports to implement.
Atlantic Mut. Ins. Co. v. Commissioner, 523 U.S. 382, 389 (1998);
see Romann v. Commissioner, 111 T.C. 273, 282 (1998). The
Supreme Court has stated that a reviewing court--
need not conclude that the agency construction was the
only one it permissibly could have adopted to uphold
the construction, or even the reading the court would
have reached if the question initially had arisen in a
judicial proceeding. [Chevron U.S.A. v. Natural Res.
Def. Council, 467 U.S. at 843 n.11.]
Rather, the reviewing court need only conclude that the
regulation is reasonable. Cottage Savings Assn. v. Commissioner,
499 U.S. 554, 560-561 (1991)(citing National Muffler Dealers
Assn. v. United States, 440 U.S. 472, 476-477 (1979)). A
regulation is reasonable if it harmonizes with the plain
language, origin, and purpose of the statute it purports to
implement. United States v. Vogel Fertilizer Co., 455 U.S. at
25-26; National Muffler Dealers Assn. v. United States, 440 U.S.
at 477.
(a) Section 1.163-8T, Temporary Income Tax Regs., 52
Fed. Reg. 24999 (July 2, 1987).
Section 1.163-8T, Temporary Income Tax Regs., supra,
provides the rules for the allocation of interest expense for
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