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267(a)(3) because it is not based on the matching principle
stated in section 267(a)(2).
The majority states that restricting the scope of the
regulations under section 267(a)(3) to the application of the
matching principle articulated in section 267(a)(2) would make
section 267(a)(3) redundant. But section 267(a)(3) literally
authorizes regulations only in order to apply the matching
principle of section 267(a)(2). Section 267(a)(3) was enacted
because Congress perceived some uncertainty in how to apply the
matching principle where the payee was a foreign person.1 It
does not authorize regulations that change the matching
principle. Thus, the Commissioner correctly argued in Tate &
Lyle, Inc.:
I.R.C. �267(a)(3) only clarified existing tax law.
* * *
* * * * * * *
Here, I.R.C. �267(a)(3), was enacted to clarify
I.R.C. �267(a)(2), which had been effective since 1984.
Tax Reform Act of 1984, Pub. L. No. 98-369, sec.
174(a)(1). Because I.R.C. �267(a)(3) is a technical
correction or clarification of the earlier law, it, too,
was made effective by Congress for tax years beginning
after December 31, 1983. Pub. L. No. 99-514,
1For example, in the case of a foreign payee there was
uncertainty whether the terms “gross income” and “method of
accounting” referred to gross income and method of accounting for
U.S. tax purposes. In Tate & Lyle, Inc. & Subs. v. Commissioner,
103 T.C. 656, 662 (1994), we agreed with respondent that the
terms “gross income” and “method of accounting” as used in sec.
267(a)(2) meant for U.S. tax purposes.
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