Shift From Libor Won’t Trigger Tax, IRS Says in Final Rule

The Internal Revenue Service issued guidance ensuring that companies won’t be subject to capital gains tax if they alter loans and derivatives to replace the scandal-tinged London Interbank Offered Rate (Libor) with new rates.

The agency released the rules on Thursday.

Under the final rules, “changes in debt instruments, derivative contracts, and other affected contracts to replace reference rates based on discontinued IBORs in a covered modification"—when a discontinued interbank offer rate is replaced with a qualified rate—won’t result in the realization of tax under section 1001, which deals with determining the amount of and recognition ...