This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

27505 

Vol. 79, No. 93 

Wednesday, May 14, 2014 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2014–0308; Directorate 

Identifier 2014–CE–012–AD] 

RIN 2120–AA64 

Airworthiness Directives; M7 

Aerospace LLC Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for M7 

Aerospace LLC Models SA227–AT, 

SA227–AC, SA227–BC, SA227–CC, and 

SA227–DC airplanes equipped with a 

bayonet shear pin main cabin door 

latching mechanism. This proposed AD 

was prompted by fatigue cracks found 

in the internal door surround doubler, 

the external skin fuselage skin, and the 

door corner fittings at the fuselage upper 

forward corner of the main cabin door 

cutout. This proposed AD would require 

repetitively inspecting the four corners 

of the main cabin door cutout for cracks, 

making necessary repairs, and reporting 

inspection results to M7 Aerospace LLC. 

We are proposing this AD to correct the 

unsafe condition on these products. 

DATES: We must receive comments on 

this proposed AD by June 30, 2014. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE., 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact M7 

Aerospace LLC, 10823 NE Entrance 

Road, San Antonio, Texas 78216; phone: 

(210) 824–9421; fax: (210) 804–7766; 

Internet: http://www.elbitsystemsus.com; email: 

MetroTech@M7Aerospace.com. You 

may review this referenced service 

information at the FAA, Small Airplane 

Directorate, 901 Locust, Kansas City, 

Missouri 64106. For information on the 

availability of this material at the FAA, 

call (816) 329–4148. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov by searching for 

and locating Docket No. FAA–2014– 

0308; or in person at the Docket 

Management Facility between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Office 

(phone: 800–647–5527) is in the 

ADDRESSES section. Comments will be 

available in the AD docket shortly after 

receipt. 

FOR FURTHER INFORMATION CONTACT: 

Andrew McAnaul, Aerospace Engineer, 

FAA, ASW–150 (c/o San Antonio 

MIDO), 10100 Reunion Place, Suite 650, 

San Antonio, Texas 78216; phone: (210) 

308–3365; fax: (210) 308–3370; email: 

andrew.mcanaul@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposal. Send your comments to 

an address listed under the ADDRESSES

section. Include ‘‘Docket No. FAA– 

2014–0308; Directorate Identifier 2014– 

CE–012–AD’’ at the beginning of your 

comments. We specifically invite 

comments on the overall regulatory, 

economic, environmental, and energy 

aspects of this proposed AD. We will 

consider all comments received by the 

closing date and may amend this 

proposed AD because of those 

comments. 

We will post all comments we 

receive, without change, to http:// 

www.regulations.gov, including any 

personal information you provide. We 

will also post a report summarizing each 

substantive verbal contact we receive 

about this proposed AD. 

Discussion 

We received reports of fatigue 

cracking of the main cabin door 

surround structure on several M7 

Aerospace LLC Models SA227–AT, 

SA227–AC, SA227–BC, SA227–CC, and 

SA227–DC airplanes that have a bayonet 

shear pin type of latching mechanism 

for the main cabin door. 

Investigation revealed that the fatigue 

cracks are related to a change in loading 

due to design changes in the door 

surround structure and the door 

latching system. 

This condition, if not corrected, could 

result in probable decompression failure 

with possible loss of structural integrity 

of the cabin structure. 

Relevant Service Information 

We reviewed M7 Aerospace LLC 

SA227 Series Commuter Category 

Service Bulletin CC7–53–005 and 

SA227 Series Service Bulletin 227–53– 

009, both dated November 15, 2013. The 

service information describes 

procedures for repetitively inspecting 

the internal and external skin doublers, 

fuselage skin, and the fuselage door 

frame corner member for cracks. The 

service information also describes 

procedures for repairing the cracks. In 

addition, if no cracks are found, the 

service information also includes 

procedures for installing a repair kit as 

preventative measure to extend the 

inspection intervals. 

FAA’s Determination 

We are proposing this AD because we 

evaluated all the relevant information 

and determined the unsafe condition 

described previously is likely to exist or 

develop in other products of the same 

type design. 

Proposed AD Requirements 

This proposed AD would require 

accomplishing the actions specified in 

the service information described 

previously. This proposed AD also 

requires sending inspection results to 

M7 Aerospace LLC. 

Costs of Compliance 

We estimate that this proposed AD 

affects 250 airplanes of U.S. registry. 


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27506 Federal Register / Vol. 79, No. 93 / Wednesday, May 14, 2014 / Proposed Rules 

We estimate the following costs to 

comply with this proposed AD: 

ESTIMATED COSTS

Action Labor 

cost 

Parts 

cost 

Cost per 

product 

Cost on U.S. 

operators 

Threshold high frequency eddy current (HFEC)/low 

frequency eddy current (LFEC)/detailed visual inspection.

2.5 work-hours × $85 per 

hour = $212.50.

Not Applicable ................. $212.50 $53,125 

We estimate the following costs to do 

any necessary repairs that would be 

required based on the results of the 

proposed inspection. We have no way of 

determining the number of aircraft that 

might need these repairs: 

ON-CONDITION COSTS

Action Labor cost Parts cost Cost per 

product 

Repair Installation ......................................................... 48 work-hours × $85 per hour = $4,080 ...................... $6,670 $10,750 

Paperwork Reduction Act 

A federal agency may not conduct or 

sponsor, and a person is not required to 

respond to, nor shall a person be subject 

to penalty for failure to comply with a 

collection of information subject to the 

requirements of the Paperwork 

Reduction Act unless that collection of 

information displays a current valid 

OMB control number. The control 

number for the collection of information 

required by this AD is 2120–0056. The 

paperwork cost associated with this AD 

has been detailed in the Costs of 

Compliance section of this document 

and includes time for reviewing 

instructions, as well as completing and 

reviewing the collection of information. 

Therefore, all reporting associated with 

this AD is mandatory. Comments 

concerning the accuracy of this burden 

and suggestions for reducing the burden 

should be directed to the FAA at 800 

Independence Ave. SW., Washington, 

DC 20591. ATTN: Information 

Collection Clearance Officer, AES–200. 

Authority for This Rulemaking 

Title 49 of the United States Code 

specifies the FAA’s authority to issue 

rules on aviation safety. Subtitle I, 

section 106, describes the authority of 

the FAA Administrator. Subtitle VII: 

Aviation Programs, describes in more 

detail the scope of the Agency’s 

authority. 

We are issuing this rulemaking under 

the authority described in Subtitle VII, 

Part A, Subpart III, section 44701: 

‘‘General requirements.’’ Under that 

section, Congress charges the FAA with 

promoting safe flight of civil aircraft in 

air commerce by prescribing regulations 

for practices, methods, and procedures 

the Administrator finds necessary for 

safety in air commerce. This proposed 

regulation is within the scope of that 

authority because it addresses an unsafe 

condition that is likely to exist or 

develop on products identified in this 

rulemaking action. 

Regulatory Findings 

We determined that this proposed AD 

would not have federalism implications 

under Executive Order 13132. This 

proposed AD would not have a 

substantial direct effect on the States, on 

the relationship between the national 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. 

For the reasons discussed above, I 

certify this proposed regulation: 

(1) Is not a ‘‘significant regulatory 

action’’ under Executive Order 12866, 

(2) Is not a ‘‘significant rule’’ under 

the DOT Regulatory Policies and 

Procedures (44 FR 11034, February 26, 

1979), 

(3) Will not affect intrastate aviation 

in Alaska, and 

(4) Will not have a significant 

economic impact, positive or negative, 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

List of Subjects in 14 CFR Part 39 

Air transportation, Aircraft, Aviation 

safety, Incorporation by reference, 

Safety. 

The Proposed Amendment 

Accordingly, under the authority 

delegated to me by the Administrator, 

the FAA proposes to amend 14 CFR part 

39 as follows: 

PART 39—AIRWORTHINESS 

DIRECTIVES 

■ 1. The authority citation for part 39 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701. 

§ 39.13 [Amended]. 

■ 2. The FAA amends § 39.13 by adding 

the following new airworthiness 

directive (AD): 

M7 Aerospace LLC: Docket No. FAA–2014– 

0308; Directorate Identifier 2014–CE– 

012–AD. 

(a) Comments Due Date 

We must receive comments by June 30, 

2014. 

(b) Affected ADs 

None. 

(c) Applicability 

This AD applies to the M7 Aerospace LLC 

airplanes listed in paragraphs (c)(1) through 

(c)(5) of this AD that are equipped with a 

bayonet shear pin main cabin door latching 

mechanism and are certificated in any 

category. Airplanes equipped with a ‘‘clickclack’’ main cabin door latching mechanism 

are not affected by this AD. Figure 3 of M7 

Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, and 

M7 Aerospace LLC SA227 Series Service 

Bulletin 227–53–009, both dated November 

15, 2013, is a picture showing both styles of 

latching mechanisms. 

(1) Model SA227–AT airplanes, serial 

numbers (S/Ns) AT570 through AT631, and 

AT695. 

(2) Model SA227–AC airplanes, S/Ns 

AC570 through AC788. 

(3) Model SA227–BC airplanes, S/Ns 

BC762, BC764, BC766, and BC770 through 

BC789. 

(4) Model SA227–CC airplanes, S/N 

CC827, CC829, and CC840 through CC844. 

(5) Model SA227–DC airplanes, S/Ns 

DC784, DC790 through DC826, DC828, 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 93 / Wednesday, May 14, 2014 / Proposed Rules 27507 

DC830 through DC839, and DC845 through 

DC904. 

(d) Subject 

Joint Aircraft System Component (JASC)/ 

Air Transport Association (ATA) of 

America—Code 5310, Fuselage Main, 

Structure. 

(e) Unsafe Condition 

This AD was prompted by fatigue cracks 

found in the internal door surround doubler, 

the external skin fuselage skin, and the door 

corner fittings at the fuselage upper forward 

corner of the main cabin door cutout. We are 

issuing the AD to prevent decompression 

failure with possible loss of structural 

integrity of the cabin structure. 

(f) Compliance 

Comply with this AD within the 

compliance times specified in paragraph (g) 

through paragraph (k) of this AD, including 

all subparagraphs, unless already done. 

(g) Inspections 

(1) Do an initial detailed visual inspection 

of the fuselage upper forward corner and 

other 3 corners of the main cabin door cutout 

for cracks following Table 1 in Step 2. 

ACCOMPLISHMENT INSTRUCTIONS of M7 

Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005 or M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, both dated November 15, 2013, 

as applicable. Do the inspection at the 

compliance times specified in paragraphs 

(g)(1)(i) through (g)(1)(iv) of this AD. For the 

purposes of this AD, owner/operators who do 

not track total aircraft flight cycles (TAC), use 

a .5 to 1 conversion, e.g., 35,000 TAC is 

equivalent to 17,500 hours time-in-service 

(TIS). For owner/operators who do not track 

flight cycles, use a 1 to 1 conversion, e.g., 300 

flight cycles are equivalent to 300 hours TIS. 

(i) For aircraft with more than 35,000 TAC, 

inspect within the next 300 flight cycles after 

the effective date of this AD. 

(ii) For aircraft with 20,001–35,000 TAC, 

inspect within the next 600 flight cycles after 

the effective date of this AD. 

(iii) For aircraft with 12,000–20,000 TAC, 

inspect within the next 1,000 flight cycles 

after the effective date of this AD. 

(iv) For aircraft with less than 12,000 TAC, 

inspect at 12,000 flight cycles or within the 

next 1,000 flight cycles after the effective 

date of this AD, whichever occurs later. 

(2) If no cracks are found during the 

inspection required by paragraph (g)(1) of 

this AD, repetitively thereafter at intervals 

not to exceed 2,000 flight cycles do a detailed 

visual inspection of the fuselage upper 

forward corner and other 3 corners of the 

main cabin door cutout for cracks following 

Table 1 in Step 2. ACCOMPLISHMENT 

INSTRUCTIONS of M7 Aerospace LLC 

SA227 Series Commuter Category Service 

Bulletin CC7–53–005 or M7 Aerospace LLC 

SA227 Series Service Bulletin 227–53–009, 

both dated November 15, 2013, as applicable. 

(h) Repair Cracks and Repetitively Inspect 

(1) If any cracks are found during any 

inspection required in paragraph (g) through 

paragraph (i) of this AD, before further flight 

after the inspection in which a crack is 

found, repair or replace the cracked structure 

following Step 3. REPAIR OF CRACKED 

INNER DOUBLE, Step 4. REPAIR OF 

CRACKED FUSELAGE SKIN, and/or Step 5. 

REPAIR OF CRACKED CORNER FITTING of 

M7 Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, or M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, both dated November 15, 2013, 

as applicable. 

(2) If you made the repairs required in 

paragraph (h)(1) of this AD by installing 

repair kit part number (P/N) 27K24191–001, 

do the threshold and repeat inspections 

following Table 2 in Step 2. 

ACCOMPLISHMENT INSTRUCTIONS of M7 

Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, dated 

November 15, 2013; or M7 Aerospace LLC 

SA227 Series Service Bulletin 227–53–009, 

dated November 15, 2013, as applicable. 

(3) If you made the repairs required in 

paragraph (h)(1) of this AD by replacing the 

fuselage skin by installing kit 27K24191–003, 

or if the corner fitting was replaced and no 

other cracks are present, repetitively 

thereafter inspect following Table 1 in Step 

2. ACCOMPLISHMENT INSTRUCTIONS of 

M7 Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, or M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, both dated November 15, 2013, 

as applicable. 

(i) Extend Repetitive Inspection Intervals 

After any inspection required in paragraph 

(g)(1) and (g)(2) of this AD and no damage, 

defects, or cracks are found, you may install 

repair kit P/N 27K24191–001 following Step 

6. ADDITION OF KIT DRAWING REPAIR 

MEMBERS AS PREVENTATIVE ACTION of 

M7 Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, or M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, both dated November 15, 2013, 

as applicable, to extend the inspection 

intervals. After installing repair kit P/N 

27K24191–001 do the threshold and repeat 

inspections following Table 3 of Step 2. 

ACCOMPLISHMENT INSTRUCTIONS of M7 

Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, or M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, both dated November 15, 2013, 

as applicable. 

(j) Reporting Requirement 

Within 30 days after any inspection 

required by paragraph (g) through paragraph 

(i) of this AD where a crack or any other 

damage is found, report the results of that 

inspection to M7 Aerospace LLC following 

the instructions specified in Step 2.I. of the 

ACCOMPLISHMENT INSTRUCTIONS of M7 

Aerospace LLC SA227 Series Commuter 

Category Service Bulletin CC7–53–005, dated 

November 15, 2013; or Step 2.J. of the 

ACCOMPLISHMENT INSTRUCTIONS of M7 

Aerospace LLC SA227 Series Service Bulletin 

227–53–009, dated November 15, 2013, as 

applicable. 

(k) Credit for Previous Repairs 

As of the effective date of this AD, owner/ 

operators who had the initial inspection and 

any resulting repairs done before the effective 

date of this AD using procedures different 

from those specified in M7 Aerospace LLC 

SA227 Series Commuter Category Service 

Bulletin CC7–53–005, dated November 15, 

2013; and M7 Aerospace LLC SA227 Series 

Service Bulletin 227–53–009, dated 

November 15, 2013, may apply for an 

alternative method of compliance (AMOC) 

following the instructions in paragraph (m) of 

this AD. 

(l) Paperwork Reduction Act Burden 

Statement 

A federal agency may not conduct or 

sponsor, and a person is not required to 

respond to, nor shall a person be subject to 

a penalty for failure to comply with a 

collection of information subject to the 

requirements of the Paperwork Reduction 

Act unless that collection of information 

displays a current valid OMB Control 

Number. The OMB Control Number for this 

information collection is 2120–0056. Public 

reporting for this collection of information is 

estimated to be approximately 5 minutes per 

response, including the time for reviewing 

instructions, completing and reviewing the 

collection of information. All responses to 

this collection of information are mandatory. 

Comments concerning the accuracy of this 

burden and suggestions for reducing the 

burden should be directed to the FAA at: 800 

Independence Ave. SW., Washington, DC 

20591, Attn: Information Collection 

Clearance Officer, AES–200. 

(m) Alternative Methods of Compliance 

(AMOCs) 

(1) The Manager, Fort Worth Airplane 

Certification Office, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

In accordance with 14 CFR 39.19, send your 

request to your principal inspector or local 

Flight Standards District Office, as 

appropriate. If sending information directly 

to the manager of the ACO, send it to the 

attention of the person identified in the 

Related Information section of this AD. 

(2) Before using any approved AMOC, 

notify your appropriate principal inspector, 

or lacking a principal inspector, the manager 

of the local flight standards district office/ 

certificate holding district office. 

(n) Related Information 

(1) For more information about this AD, 

contact Andrew McAnaul, Aerospace 

Engineer, FAA, ASW–150 (c/o San Antonio 

MIDO), 10100 Reunion Place, Suite 650, San 

Antonio, Texas 78216; phone: (210) 308– 

3365; fax: (210) 308–3370; email: 

andrew.mcanaul@faa.gov. 

(2) For service information identified in 

this AD, contact M7 Aerospace LLC, 10823 

NE Entrance Road, San Antonio, Texas 

78216; phone: (210) 824–9421; fax: (210) 

804–7766; Internet: http:// 

www.m7aerospace.com; email: 

MetroTech@M7Aerospace.com. You may 

view this referenced service information at 

the FAA, Small Airplane Directorate, 901 

Locust, Kansas City, Missouri 64106. For 

information on the availability of this 

material at the FAA, call 816–329–4148. 


emcdonald on DSK67QTVN1PROD with PROPOSALS
27508 Federal Register / Vol. 79, No. 93 / Wednesday, May 14, 2014 / Proposed Rules 

1Rev. Rul. 69–94 (1969–1 CB 189), (see 

§ 601.601(d)(2)(ii)(b) of this chapter). 

2Rev. Rul. 71–220 (1971–1 CB 210), (see 

§ 601.601(d)(2)(ii)(b) of this chapter). 

3Rev. Rul. 71–286 (1971–2 CB 263), (see 

§ 601.601(d)(2)(ii)(b) of this chapter). 

4Rev. Rul. 73–425 (1973–2 CB 222), (see 

§ 601.601(d)(2)(ii)(b) of this chapter). 

5Rev. Rul. 75–424 (1975–2 CB 269), (see 

§ 601.601(d)(2)(ii)(b) of this chapter). 

6One of the requirements for qualifying as a REIT 

is that a sufficiently large fraction of an entity’s 

gross income be derived from certain specified 

types of income (which include ‘‘rents from real 

property’’ and ‘‘interest on obligations secured by 

mortgages on real property or on interests in real 

property’’). Section 856(c)(3). 

Issued in Kansas City, Missouri on May 7, 

2014. 

Timothy Smyth, 

Acting Manager, Small Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. 2014–11072 Filed 5–13–14; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–150760–13] 

RIN 1545–BM05 

Definition of Real Estate Investment 

Trust Real Property 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations that clarify the 

definition of real property for purposes 

of the real estate investment trust 

provisions of the Internal Revenue Code 

(Code). These proposed regulations 

provide guidance to real estate 

investment trusts and their 

shareholders. This document also 

provides notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by August 12, 2014. 

Requests to speak and outlines of topics 

to be discussed at the public hearing 

scheduled for September 18, 2014 must 

be received by August 12, 2014. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–150760–13), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–150760– 

13), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically, 

via the Federal eRulemaking Portal at 

www.regulations.gov (IRS REG–150760– 

13). The public hearing will be held in 

the IRS Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue 

NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Andrea Hoffenson, (202) 317–6842, or 

Julanne Allen, (202) 317–6945; 

concerning submissions of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Oluwafunmilayo (Funmi) 

Taylor, (202) 317–6901 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains amendments 

to the Income Tax Regulations (26 CFR 

part 1) relating to real estate investment 

trusts (REITs). Section 856 of the Code 

defines a REIT by setting forth various 

requirements. One of the requirements 

for a taxpayer to qualify as a REIT is that 

at the close of each quarter of the 

taxable year at least 75 percent of the 

value of its total assets is represented by 

real estate assets, cash and cash items 

(including receivables), and government 

securities. See section 856(c)(4). Section 

856(c)(5)(B) defines real estate assets to 

include real property and interests in 

real property. Section 856(c)(5)(C) 

indicates that real property means ‘‘land 

or improvements thereon.’’ Section 

1.856–3(d) of the Income Tax 

Regulations, promulgated in 1962, 

defines real property for purposes of the 

regulations under sections 856 through 

859 as— 

land or improvements thereon, such as 

buildings or other inherently permanent 

structures thereon (including items which are 

structural components of such buildings or 

structures). In addition, the term ‘‘real 

property’’ includes interests in real property. 

Local law definitions will not be controlling 

for purposes of determining the meaning of 

the term ‘‘real property’’ as used in section 

856 and the regulations thereunder. The term 

includes, for example, the wiring in a 

building, plumbing systems, central heating, 

or central air-conditioning machinery, pipes 

or ducts, elevators or escalators installed in 

the building, or other items which are 

structural components of a building or other 

permanent structure. The term does not 

include assets accessory to the operation of 

a business, such as machinery, printing 

press, transportation equipment which is not 

a structural component of the building, office 

equipment, refrigerators, individual airconditioning units, grocery counters, 

furnishings of a motel, hotel, or office 

building, etc., even though such items may 

be termed fixtures under local law. 

Section 1.856–3(d). 

The IRS issued revenue rulings 

between 1969 and 1975 addressing 

whether certain assets qualify as real 

property for purposes of section 856. 

Specifically, the published rulings 

describe assets such as railroad 

properties,1 mobile home units 

permanently installed in a planned 

community,2 air rights over real 

property,3 interests in mortgage loans 

secured by total energy systems,4 and 

mortgage loans secured by microwave 

transmission property,5 and the rulings 

address whether the assets qualify as 

either real property or interests in real 

property under section 856. Since these 

published rulings were issued, REITs 

have sought to invest in various types of 

assets that are not directly addressed by 

the regulations or the published rulings, 

and have asked for and received letter 

rulings from the IRS addressing certain 

of these assets. Because letter rulings are 

limited to their particular facts and may 

not be relied upon by taxpayers other 

than the taxpayer that received the 

ruling, see section 6110(k)(3), letter 

rulings are not a substitute for published 

guidance. The IRS and the Treasury 

Department recognize the need to 

provide additional published guidance 

on the definition of real property under 

sections 856 through 859. This 

document proposes regulations that 

define real property for purposes of 

sections 856 through 859 by providing 

a framework to analyze the types of 

assets in which REITs seek to invest. 

These proposed regulations provide 

neither explicit nor implicit guidance 

regarding whether various types of 

income are described in section 

856(c)(3).6

Explanation of Provisions 

Consistent with section 856, the 

existing regulations, and published 

guidance interpreting those regulations, 

these proposed regulations define real 

property to include land, inherently 

permanent structures, and structural 

components. In determining whether an 

item is land, an inherently permanent 

structure, or a structural component, 

these proposed regulations first test 

whether the item is a distinct asset, 

which is the unit of property to which 

the definitions in these proposed 

regulations apply. 

In addition, these proposed 

regulations identify certain types of 

intangible assets that are real property 

or interests in real property for purposes 

of sections 856 through 859. These 

proposed regulations include examples 

to illustrate the application of the 


emcdonald on DSK67QTVN1PROD with PROPOSALS