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Regs., could have seen and anticipated an attribution rule
therein may also be understood from the legislative history of
section 469. The legislative history speaks directly to an
attribution rule, stating explicitly:
The conferees believe that clarification is desirable
regarding the regulatory authority provided to the
Treasury with regard to the definition of income that
is treated as portfolio income or as otherwise not
arising from a passive activity. The conferees intend
that this authority be exercised to protect the
underlying purpose of the passive loss provision, i.e.,
preventing the sheltering of positive income sources
through the use of tax losses derived from passive
business activities.
Examples where the exercise of such authority may
(if the * * * [Commissioner] so determines) be
appropriate include the following: * * * related party
leases or sub-leases, with respect to property used in
a business activity, that have the effect of reducing
active business income and creating passive income. *
* * [H. Conf. Rept. 99-841 (Vol. II), at II-197
(1986), 1986-3 C.B. (Vol. 4) 147.]
In sum, we believe that the purposes of notice and comment
were adequately served in the Commissioner's promulgation of
section 1.469-4, Income Tax Regs. The Commissioner adopted the
attribution rule pursuant to an explicit congressional grant of
authority, and commentators had a fair opportunity to present
their views on the contents of that rule. The rule derives
directly from the legislative history to section 469, and it is
both in character with the original proposal for section 469, and
the regulations thereunder, and a logical outgrowth of the two
rounds of notice and comment on the proposed regulations.
Whereas petitioners would force the Commissioner to comply with
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