SECTION 5. SECTION 367(a)

GUIDANCE

.01 Active Conduct of a Trade or Business that Produces Rents or Royalties

In light of section 415 of the AJCA and its legislative history, the regulations under section 367(a) will provide that the principles of section 954(c)(2)(A) (as amended by the AJCA), and the regulations thereunder (as they will be amended pursuant to section 3 of this notice), shall apply to determine whether a trade or business that produces rents or royalties is actively conducted under § 1.367(a)–2T(b)(3). Until those regulations under section 367(a) are issued, taxpayers relying upon this notice must state that they are applying the provisions of this notice to meet the requirement of § 1.6038B–1T(c)(4)(i) and (iv) to specify the reason the transfer qualifies for the active trade or business exception.

.02 Conduct of Trade or Business Outside of the United States

For purposes of applying § 1.367(a)–2T(b)(4) or a similar provision of future regulations, the regulations

2006–21 I.R.B. 925 May 22, 2006

Office of Associate Chief Counsel (International). For comments or questions regarding sections 954 or 956, contact Mr. Kleinman at (202) 622–3840. For comments or questions regarding section 367, contact Mr. McCall at (202) 622–3860.

the IRS are considering clarifying how the depreciation recapture rules apply to aircraft and vessels that were used both in and outside the United States. Treasury and the IRS request comments on how the depreciation recapture rules under section 367(a) should apply to leased aircraft and vessels.

Written comments on the issues addressed in this notice may be submitted to the Office of Associate Chief Counsel International, Attention: Jason Kleinman (Notice 2006–48), room

4710, CC:INTL:B2, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, D.C., 20224. Alternatively, taxpayers may submit comments electronically to Notice.comments@ml.irscoun- sel.treas.gov . Comments will be available for public inspection and copying.