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requirements in that it filed true and accurate Federal income
tax returns. According to petitioner, section 882(c)(2) does not
require that the subject returns be filed timely, and the
disputed regulations are invalid to the extent they impose such a
requirement. Respondent argues that section 882(c)(2) includes a
clear timely filing requirement and that the disputed regulations
are a valid construction of that requirement. According to
respondent, petitioner may not deduct its expenses because it did
not file the subject returns timely.
We agree with petitioner. To best understand our decision,
we first discuss the relevant provisions and developments in the
law which preceded the issuance of the disputed regulations. We
then address our interpretation of the relevant text and the
standard by which we judge the disputed regulations to be
invalid.
III. Relevant Filing Requirements
Every corporation subject to Federal income tax must file a
Federal income tax return with respect to that tax. See sec.
6012(a)(2). The regulations interpret section 6012(a)(2) to
require that such a corporation file a Federal income tax return
even if it does not have any gross or taxable income for the
year. See sec. 1.6012-2(a)(1), Income Tax Regs. The regulations
interpret section 6012(a)(2) to apply to foreign corporations to
the extent set forth in section 1.6012-2(g)(1), Income Tax Regs.
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