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foreign-source income. In the Tax Reform Act of 1976, the
Congress eliminated the exemption and in its place enacted the
credit mechanism of section 936. Tax Reform Act of 1976, Pub.L.
94-455, sec. 1051, 90 Stat. 1520, 1643. Section 936 uses, and
each of these predecessors used, the term “active conduct of a
trade or business”. See MedChem (P.R.), Inc. v. Commissioner,
116 T.C. at 333-336. Also in accordance with the general
interpretation rule that statutory language should be given the
same meaning wherever it appears, we reviewed the regulations
interpreting “active conduct of a trade or business” in sections
1.179-2(c)(6), Income Tax Regs., 1.355-3(b)(2), Income Tax Regs.,
and 1.367(a)-2T(b), Temporary Income Tax Regs., 51 Fed. Reg.
17942 (May 15, 1986). Id. at 330-333. Synthesizing the
foregoing, we concluded as follows, id. at 336-337:
On the basis of our understanding of the legislative
record, we believe that Congress promulgated the “active
conduct of a trade or business” requirement of section
936(a) intending to prevent a domestic corporate taxpayer
from availing itself of the possessions tax credit unless it
established and regularly operated an employment-producing,
profit-motivated business activity in a U.S. possession. We
also believe that Congress expected the taxpayer to
participate meaningfully in the management and operation of
that activity and to invest significantly in that activity,
the expected result of which would be to strengthen the
economy of the possession where the activity was located. In
light of Congress’ intent for section 936, the Secretary’s
interpretations of the subject phrase for purposes of other
sections of the Code, and the Supreme Court’s interpretation
of the phrase “trade or business” in section 162(a), we
believe that, for purposes of section 936(a), a taxpayer
actively conducts a trade or business in a U.S. possession
only if it participates regularly, continually, extensively,
and actively in the management and operation of its profit-
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