SECTION 6. COMMENTS

Treasury and the IRS are considering issuing subsequent public guidance that addresses additional issues under Treas. Reg. § 1.367(a)–8. Accordingly, comments are requested regarding the application of Treas. Reg. § 1.367(a)–8, including whether other transactions should be excepted from being treated as triggering events pursuant to rules similar to those contained in this notice. For example, comments are requested as to the most appropriate treatment of asset reorganizations that do not satisfy the conditions described in section 3.02(A) or 3.02(B) of this notice. In addition, comments are requested as to the most appropriate treatment of certain upstream and down- stream reorganizations (including those in which the same corporation becomes both the transferee foreign corporation and transferred corporation, as described in section 3.01 of this notice), and divisive reorganizations qualifying under section 368(a)(1)(D) or (G), involving the U.S. transferor corporation, the foreign transferee corporation, and the transferred corporation. Comments also are requested as to whether rules similar to the rules contained in section 3.03 and 3.04 should apply to triangular reorganizations and, if so, how such rules would apply. Finally, comments are requested as to other transactions which should terminate a gain recognition agreement pursuant to Treas. Reg. § 1.367(a)–8(h)(3) when the stock of the transferred corporation is transferred to the U.S. transferor (or other U.S. person).

Written comments on the issues addressed in this notice may be submitted to the Office of Associate Chief Counsel International, Attention: Notice 2005–74, room 4567, CC:INTL:BR4, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, 20224. Alternatively, taxpayers may submit comments electronically to No- tice.Comments@m1.irscounsel.treas.gov . Comments will be available for public inspection and copying.

October 17, 2005 729 2005–42 I.R.B.

even though the arrangement does not require the employee to return the portion of the allowance that relates to days of travel substantiated and that exceeds the amount of the employee’s expenses deemed substantiated pursuant to rules prescribed under § 274(d), provided the allowance is reasonably calculated not to exceed the amount of the employee’s expenses or anticipated expenses and the employee is required to return within a reasonable period of time any portion of the allowance that relates to days of travel not substantiated.

.08 Section 1.62–2(h)(2)(i)(B) provides that, if a payor pays a per diem allowance that meets the requirements of § 1.62–2(c)(1), the portion, if any, of the allowance that relates to days of travel substantiated in accordance with § 1.62–2(e), that exceeds the amount of the employee’s expenses deemed substantiated for the travel pursuant to rules prescribed under §§ 274(d) and 1.274–5(g) or 1.274–5(j), and that the employee is not required to return, is subject to withholding and payment of employment taxes. See §§ 31.3121(a)–3, 31.3231(e)–1(a)(5), 31.3306(b)–2, and 31.3401(a)–4 of the Employment Tax Regulations. Because the employee is not required to return this excess portion, the reasonable period of time provisions of § 1.62–2(g) (relating to the return of excess amounts) do not apply to this portion.

.09 Under § 1.62–2(h)(2)(i)(B)( 4 ), the Commissioner has the discretion to prescribe special rules regarding the timing of withholding and payment of employment taxes on per diem allowances.

.10 Section 1.274–5(j)(1) grants the Commissioner the authority to establish a method under which a taxpayer may elect to use a specified amount for meals paid or incurred while traveling away from home in lieu of substantiating the actual cost of meals.

.11 Section 1.274–5(j)(3) grants the Commissioner the authority to establish a method under which a taxpayer may elect to use a specified amount for incidental expenses paid or incurred while traveling away from home in lieu of substantiating the actual cost of incidental expenses.

.12 Sections 3.02(1)(a), 4.04(6), and 5.06 of this revenue procedure provide transition rules for the last 3 months of calendar year 2005.

lodging expenses will be deemed substantiated when a payor provides an allowance to pay for those expenses but not meal and incidental expenses.