- 25 -
See sec. 1.861-8T(h), Temporary Income Tax Regs., 53 Fed.
Reg. 35477 (Sept. 14, 1988).
We do not agree with petitioner's contention that,
by promulgating the new rules without retroactive effect,
the Secretary of the Treasury indicated "that the express
restrictive language requiring the use of gross interest
expense for purposes of allocation and apportionment was
intended as a change, rather than a clarification, of prior
law." To the contrary, the 1988 temporary regulations,
including section 1.861-9T(a), Temporary Income Tax Regs.,
supra, were promulgated to reflect the revisions made by
the Tax Reform Act of 1986, including the enactment of
section 864(e), which substantially changed some of the
rules for the allocation and apportionment of interest
expenses. These new provisions were made effective, for
the most part, for tax years beginning after December 31,
1986. Tax Reform Act of 1986, Pub. L. 99-514, sec.
1215(c)(1), 100 Stat. 2545. It was appropriate to make
the regulations reflecting those changes effective at the
same time. In these circumstances, we do not believe that
promulgating the new rules without retroactive effect
suggests that the sentence in section 1.861-9T(a),
Temporary Income Tax Regs., supra, quoted above, containing
the words, "the gross amount of interest expense", was
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