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Whether or not respondent has caught a rabbit, it would
appear that petitioner is in the soup. The question is whether
petitioner belongs there.
Section 502(b)(1) expressly provides that its special rule
as to the meaning of “trade or business” applies “For purposes of
this section”. Consequently, in construing section 502, we do
not read subsection (a) in isolation but in conjunction with the
special rule of subsection (b)(1), which addresses the meaning of
the term “trade or business”.
Section 502(b)(1) excludes from the term “trade or business”
the deriving of rents that would be excluded from UBTI under
section 512(b)(3) if section 512 applied to the organization.
Under traditional principles of statutory construction, the
statute’s explicit provision excluding rental activity that meets
this test should be understood as precluding the exclusion of
rental activity that does not meet this test. See Silvers v.
Sony Pictures Entmt., Inc., 402 F.2d 881, 885 (9th Cir. 2005);
Catterall v. Commissioner, 68 T.C. 413, 421 (1977), affd. sub
nom. Vorbleski v. Commissioner, 589 F.2d 123 (3d Cir. 1978); see
also Black’s Law Dictionary 620 (8th ed. 2004) (the statutory
canon of construction “expressio unius est exclusio alterius”
holds that “to express or include one thing implies the exclusion
of the other, or of the alternative”).
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Last modified: November 10, 2007