[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.149(g)-1]

[Page 721-722]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.149(g)-1  Hedge bonds.

    (a) Certain definitions. Except as otherwise provided, the 
definitions set forth in Sec. 1.148-1 apply for purposes of section 
149(g) and this section. In addition, the following terms have the 
following meanings:
    Reasonable expectations means reasonable expectations (as defined in 
Sec. 1.148-1), as modified to take into account the provisions of 
section 149(f)(2)(B).
    Spendable proceeds means net sale proceeds (as defined in 
Sec. 1.148-1).
    (b) Applicability of arbitrage allocation and accounting rules. 
Section 1.148-6 applies for purposes of section 149(g), except that an 
expenditure that results in the creation of replacement proceeds (other 
than amounts in a bona fide debt service fund or a reasonably required 
reserve or replacement fund) is not an expenditure for purposes of 
section 149(g).
    (c) Refundings--(1) Investment in tax-exempt bonds. A bond issued to 
refund a bond that is a tax-exempt bond by virtue of the rule in section 
149(g)(3)(B) is not a tax-exempt bond unless the gross proceeds of that 
refunding bond (other than proceeds in a refunding escrow for the 
refunded bond) satisfy the requirements of section 149(g)(3)(B).

[[Page 722]]

    (2) Anti-abuse rule. A refunding bond is treated as a hedge bond 
unless there is a significant governmental purpose for the issuance of 
that bond (e.g., an advance refunding bond issued to realize debt 
service savings or to relieve the issuer of significantly burdensome 
document provisions, but not to otherwise hedge against future increases 
in interest rates).
    (d) Effective date. This section applies to bonds issued after June 
30, 1993 to which Secs. 1.148-1 through 1.148-11 apply. In addition, 
this section applies to any issue to which the election described in 
Sec. 1.148-11(b)(1) is made.

[T.D. 8476, 58 FR 33549, June 18, 1993]