It is the pass-through of losses that makes artificial increases in equity interests of particular concern. See, e.g., Levy v. Commissioner, 732 F.2d 1435, 1437 (9th Cir. 1984). We don't have to tread quite so lightly in the C Corp context, since a C Corp doesn't funnel losses to the shareholder.

However, the question presented is purely one of legislative interpretation, not one of fact. Since tax exemptions are a matter of legislative grace, and as such are narrowly construed, a party seeking to gain benefit, as appellant does here, carries the burden of demonstrating that the exemption applies to its situation. Bingler v. Johnson, 394 U.S. 741, 751-52, 89 S.Ct. 1439, 1445-46, 22 L.Ed.2d 695 (1969); Holt v. Commissioner, 364 F.2d 38, 40 (8th Cir. 1966); Luben, 707 F.2d at 1041; see Levy v. Commissioner, 732 F.2d 1435, 1436 (9th Cir. 1984). Appellant has failed to carry this burden.

89 U.S. at 574-75. This does little to help Plaintiff's case, and more recent precedent provides no richer fodder for Plaintiff's arguments. Tax exemptions are modernly considered a matter of "legislative grace," Levy v. Comm'r of Internal Revenue, 732 F.2d 1435, 1436 (9th Cir. 1984); IHC Health Plans, Inc. v. Comm'r of Internal Revenue, 325 F.3d 1188, 1194 (10th Cir. 2003), and there is no indication that contractual rights inhere even where such an exemption is granted only following a showing of charitable purpose. Courts have repeatedly held that the tax code is not contractual in nature, see Lane County v. Oregon, 74 U.S. 71, 80, 19 L.Ed. 101 (1868); McLaughlin v. Comm'r of I.R.S., 832 F.2d 986, 987 (7th Cir. 1987), and Plaintiff offers no plausible argument for the application of the law of contracts to exemptions granted by the code. The tax code and its exemptions are, "unlike contracts . . . `inherently subject to revision and repeal.

Typical is a case involving the so-called ‘three-corner‘ exchange, which was described in Biggs, 69 T.C. at 913, as follows: Cf. e.g. Bingler v. Johnson, 394 U.S. 741, 752 (1969) ( ‘exemptions from taxation are to be construed narrowly‘); Commissioner v. Jacobson, 336 U.S. 28, 49 (1949) (‘exemptions * * * should be construed with restraint‘); Bank of Commerce v. Tennessee, 161 U.S. 134, 146 (1896) (‘a well founded doubt is fatal to the claim [for exemption] ‘); Storall Manufacturing Co., Inc. v. United States, 755 F.2d 664, 665 (8th Cir. 1985) (‘tax exemptions are a matter of legislative grace, and as such are narrowly construed‘); Levy v. Commissioner, 732 F.2d 1435, 1436 (9th Cir. 1984) (‘Exemptions from taxation are matters of legislative grace and will be construed narrowly‘); Central Tablet Manufacturing Co. v. United States, 481 F.2d 954, 960 (6th Cir. 1973) (‘We have recently reaffirmed in a case involving another nonrecognition statute the 'well settled principle that statutes granting tax exemptions or deferments must be strictly construed,’‘); Elam v. Commissioner, 477 F.2d 1333, 1335 (6th Cir. 1973) (‘statutes granting tax exemptions or deferments must be strictly construed‘); Miller v. Commissioner, 93 T.C. 330, 340 (1989) ( ‘statutes excluding items from gross income are to be narrowly construed ‘); Butka v. Commissioner, 91 T.C. 110, 117 (1988), affd. without published opinion 886 F.2d 442 (D.C. Cir. 1989) (‘deductions and exemptions from taxation are to be narrowly construed‘); Independent Co-op Milk Producers v. Commissioner, 76 T.C. 1001, 1014 (1981) ( ‘Whether * * * categorized as exclusions or deductions * * * it is axiomatic that such provisions are