Swallows Holding, Ltd. - Page 2

                                         -2-                                          
               Commissioner, 125 F.2d 906 (4th Cir. 1942), affg.                      
               42 B.T.A. 1248 (1940); Ardbern Co. v. Commissioner,                    
               120 F.2d 424 (4th Cir. 1941), modifying and remanding                  
               on other grounds 41 B.T.A. 910 (1940).  R continues to                 
               adhere to his rejected interpretation and now attempts                 
               to support that interpretation by citing Treasury                      
               regulations issued in 1990.  Those regulations                         
               interpret sec. 882(c)(2), I.R.C., to provide that a                    
               foreign corporation generally is entitled to deduct its                
               expenses only if it files a timely return.                             
                    Held:  A timely filing requirement is not found in                
               a plain reading of sec. 882(c)(2), I.R.C.                              
                    Held, further, the timely filing requirement in                   
               the regulations is invalid in that it is unreasonable                  
               under a plain reading of sec. 882(c)(2), I.R.C., and an                
               application of the considerations set forth in Natl.                   
               Muffler Dealers Association v. United States, 440 U.S.                 
               472 (1979).                                                            


               Phillip L. Jelsma, for petitioner.                                     
               Thomas A. Dombrowski and Nina E. Chowdhry, for respondent.             

               LARO, Judge:  Petitioner petitioned the Court to redetermine           
          respondent’s determination of deficiencies in its Federal income            
          taxes for its taxable years ended May 31, 1994, 1995, and 1996              
          (1994, 1995, and 1996 taxable years, respectively; collectively,            
          subject years), and additions thereto under section 6651(a)(1).1            
          The deficiencies and additions to tax are as follows:                       







               1 Unless otherwise noted, section references are to the                
          applicable versions of the Internal Revenue Code of 1986.  Rule             
          references are to the Tax Court Rules of Practice and Procedure.            




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