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Final Treasury Regulations on Transition From IBORs to Qualified Rates  


Author:  Charles R. Bogle.; Sarah A. Nelson.; Ester Lee.; Jeffrey Funston.


Source: Volume 39, Number 02, Winter 2022 , pp.33-41(9)




Journal of Taxation of Investments

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Abstract: 

The Internal Revenue Service and the U.S. Treasury Department have issued final regulations providing rules for taxpayers transitioning from interbank offered rates to qualified rates. These regulations provide financial institutions, counterparties, and investors with helpful guidance and clarification of the October 2019 proposed regulations by generally providing that modifications made in accordance with the final regulations will not be considered a taxable event, although certain questions remain unresolved. Most notably, the final regulations remove the fair market value requirement for the replacement rate that was in the proposed regulations, and speak to the consequences of modifications in the context of real estate mortgage investment conduits, investment trusts, and integrated and hedging transactions, among others.

Keywords: benchmark rates, significant modification of debt instrument, IRC Sec. 1001, Rev. Proc. 2020-44, T.D. 9961, covered modifications

Affiliations:  1: Morgan Lewis; 2: Morgan Lewis ; 3: Morgan Lewis ; 4: Morgan Lewis .

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