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Re: Yield Burning, What the heck is it?
Chapman, Spira & Carson - Disscusion

From: National Association of Higher Educational Facilities Authorities
Date: 4/25/99
Time: 8:24:18 AM
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This is part of an article that was writen by J. Edward Fox and Charles A. Samuels and touched on how the IRS was handling the Yield-Burning issue. Chapman

IRS Final Rules on Yield-Burning

In late December, the Internal Revenue Service issued the finalized regulations providing a safe harbor bond issuers can use to ensure that they do not violate arbitrage rules when they invest bond proceeds in Treasury Securities. These final rules are applicable to bonds sold on or after March 1, 1999 and represent a major step in the IRS's effort to curb yield-burning .

Treasury Attorney Advisor Ed Oswald indicated that final rules do not materially deviate from the standards set forth in the proposed rules issued in June 1996. According to Oswald, if an issuer follows the fair market value safe harbor rules, the price of the issuer's investment will not be challenged. The biggest change between the proposed and final rules was to create a safe harbor rather than a rebuttable presumption . These rules, which appeared in the December 30, 1998 Federal Register, apply only to guaranteed investment contracts and yield restricted defeasance escrows.


Last changed: March 17, 2000