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particular Code provisions”, respondent was, of course, free to
amend his regulations to require a minimum period of continuous
operation of a foreign disregarded entity’s business, prior to
the disposition of that business, as a condition precedent to
treating the owner as having been engaged in the trade or
business for purposes of characterizing the gain or loss. But,
in the absence of respondent’s exercise of that authority, we
must apply the regulation as written. See Exxon Corp. v. United
States, 88 F.3d 968, 974-975 (Fed. Cir. 1996); Woods Inv. Co. v.
Commissioner, 85 T.C. 274, 282 (1985); Henry C. Beck Builders,
Inc. v. Commissioner, 41 T.C. 616, 628 (1964). As we observed in
sustaining the application of a provision of the consolidated
return regulations, the fact that the regulation gives rise to a
perceived abuse is “a problem of respondent’s own making”, a
problem that respondent has allowed to persist by choosing “not
to amend the regulations to correct the problem.” CSI
Hydrostatic Testers, Inc. v. Commissioner, 103 T.C. 398, 411
(1994), affd. 62 F.3d 136 (5th Cir. 1995).21
21 Respondent did include an allegedly corrective amendment
as part of proposed regulations issued on Nov. 29, 1999. See
REG-110385-99, 64 Fed. Reg. 66591 (Nov. 29, 1999). The proposed
regulations contained a special rule for foreign disregarded
entities used in a so-called extraordinary transaction, one of
which constitutes the sale of a 10-percent or greater interest in
such an entity within 12 months of the entity’s change in
classification from association taxable as a corporation to
disregarded entity. Under those circumstances, the proposed
regulations provided that the disregarded entity “will instead be
(continued...)
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