HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Announcement 2006–43, page 48. This announcement renews the Tax Exempt Bond (TEB) Mediation Pilot Program set forth in Announcement 2003–36, 2003–1 C.B. 1093, for an additional one-year period beginning on July 3, 2006.

INCOME TAX

T.D. 9265, page 1. REG–112994–06, page 47. Temporary and proposed regulations under section 7874(a)(2)(B) of the Code provide rules for determining whether a foreign corporation is a surrogate foreign corporation. Specifically, the regulations explain when there is an indirect acquisition of a domestic corporation’s properties for purposes of section 7874(a)(2)(B). The regulations provide guidance for determining when the expanded affiliated group has substantial business activities in a foreign country for purposes of section 7874(a)(2)(B)(iii). In addition, the regulations include a rule that in certain situations, a publicly traded partnership may be treated as a surrogate foreign corporation. The regulations also provide rules for the treatment of options of the surrogate foreign corporation for purposes of section 7874(a)(2)(B)(ii). A public hearing on the proposed regulations is scheduled for October 24, 2006.

REG–135866–02, page 34. Proposed regulations under sections 367 and 1248 of the Code set forth principles for the attribution of earnings and profits to shares of stock of current or former controlled foreign corporations that participate in certain nonrecognition transac

Finding Lists begin on page ii.