MAKING INSTRUMENT SCHEDULE LIGHTWRITE 6 SERIES

See Examples 6 and 7 of paragraph (a)(9)(iv) of this section. Any contingent payment features of the qualifying debt instrument must be fully offset by the hedge such that the synthetic debt instrument is not classified as a contingent payment debt instrument.

(i) All payments to be made or received under the qualifying debt instrument (or amounts determined by reference to a nonfunctional currency) are fully hedged on the date the taxpayer identifies the transaction under paragraph (a) of this section as a qualified hedging transaction such that a yield to maturity (under principles of section 1272) in the currency in which the synthetic debt instrument is denominated (as determined under paragraph (a)(9)(ii)(A) of this section) can be calculated. A qualifying debt instrument and a hedge are an integrated economic transaction if all of the following requirements are satisfied. (5) Definition of integrated economic transaction. 423 to transactions entered into after Decemand before September 21, 1989. A taxpayer may apply the definition of currency swap contract set forth in В§ 1.988-2(e)(2)(ii) in lieu of the definition of swap agreement in section 2(e)(5) of Notice 87-11, 1987-1 C.B. (ii) Retroactive application of definition of currency swap contract.

MAKING INSTRUMENT SCHEDULE LIGHTWRITE 6 SERIES

A В§ 1.988-5(a) hedge (hereinafter referred to in this paragraph (a) as a вЂњhedgeвЂќ) is a spot contract, futures contract, forward contract, option contract, notional principal contract, currency swap contract, similar financial instrument, or series or combination thereof, that when integrated with a qualifying debt instrument permits the calculation of a yield to maturity (under principles of section 1272) in the currency in which the synthetic debt instrument is denominated (as determined under paragraph (a)(9)(ii)(A) of this section). See Example 8 in paragraph (a)(9)(iv) of this section. If a debt instrument satisfies the requirements of paragraph (a)(3)(i) of this section, and all principal and interest payments under the instrument are hedged in the same proportion, then for purposes of this paragraph (a), that portion of the instrument that is hedged is eligible to be treated as a qualifying debt instrument, and the rules of this paragraph (a) shall apply separately to such qualifying debt instrument. (ii) Special rule for debt instrument of which all payments are proportionately hedged.

A qualifying debt instrument does not include accounts payable, accounts receivable or similar items of expense or income. A qualifying debt instrument is a debt instrument described in В§ 1.988-1(a)(2)(i), regardless of whether denominated in, or determined by reference to, nonfunctional currency (including dual currency debt instruments, multi-currency debt instruments and contingent payment debt instruments). dollar if the rate that approximates the Federal short-term rate in such currency is at least 20 percentage points higher than the Federal short term rate (determined under section 1274(d)) on the date the taxpayer identifies the transaction as a qualified hedging transaction. This paragraph (a) does not apply with respect to a qualified hedging transaction that creates a synthetic asset or liability denominated in, or determined by reference to, a currency other than the U.S. However, if the qualified hedging transaction results in a synthetic nonfunctional currency denominated debt instrument, such instrument shall be subject to the rules of В§ 1.988-2(b). If a taxpayer enters into a transaction that is a qualified hedging transaction, no exchange gain or loss is recognized by the taxpayer on the qualifying debt instrument or on the В§ 1.988-5(a) hedge for the period that either is part of a qualified hedging transaction, and the transactions shall be integrated as provided in paragraph (a)(9) of this section. A qualified hedging transaction is an integrated economic transaction, as provided in paragraph (a)(5) of this section, consisting of a qualifying debt instrument as defined in paragraph (a)(3) of this section and a В§ 1.988-5(a) hedge as defined in paragraph (a)(4) of this section. This paragraph (a) applies to a qualified hedging transaction as defined in this paragraph (a)(1). (a) Integration of a nonfunctional currency debt instrument and a В§ 1.988-5(a) hedge. В§ 1.988-5 Section 988(d) hedging transactions.

Making instrument schedule lightwrite 6