[Federal Register Volume 59, Number 136 (Monday, July 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16869]


[[Page Unknown]]

[Federal Register: July 18, 1994]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[FI-34-94]
RIN 1545-AS75

 

Hedging Transactions by Members of a Consolidated Group

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to the 
character and timing of gain or loss from certain hedging transactions 
entered into by members of a consolidated group. These proposed 
regulations apply when one member of the group hedges the risk of 
another member or enters into a hedge with another member. The 
regulations are needed because related-party hedging is a common 
business practice and existing regulations treat as hedging 
transactions only hedges entered into by a taxpayer to reduce its own 
risk. This document also provides notice of a public hearing on these 
proposed regulations.

DATES: Written comments must be received by September 26, 1994. 
Requests to speak (with outlines of oral comments) at a public hearing 
scheduled for October 18, 1994, must be received by September 26, 1994.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (FI-34-94) room 5228, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. In the alternative, submissions may be hand delivered between 
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (FI-34-94), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, 
Washington, DC. The public hearing has been scheduled to be held in 
room 3718, 1111 Constitution Avenue, NW, Washington, DC 20224.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Jo Lynn 
Ricks of the Office of the Assistant Chief Counsel (Financial 
Institutions and Products), (202) 622-3920 (not a toll-free number); 
concerning submissions and the hearing, Carol Savage, (202) 622-8452 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act (44 U.S.C. 
3504(h)). Comments on the collections of information should be sent to 
the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, PC:FP, Washington, DC 
20224.
    The collections of information are in Secs. 1.1221-2(d)(2)(iv) and 
1.1221-2(e)(5). This information is required by the IRS to aid it in 
administering the law and to prevent manipulation, such as 
recharacterization of transactions in view of later developments. This 
information will be used to determine whether the taxpayer has elected 
separate-entity treatment under Sec. 1.1221-2(d)(2) and to verify that 
the taxpayer is properly reporting its business hedging transactions. 
The likely respondents and recordkeepers are businesses or other for-
profit institutions.
    Estimated total annual reporting and recordkeeping burden: 75,000 
hrs.
    The estimated annual burden per respondent or recordkeeper varies 
from 1.0 to 40.0 hours, depending on individual circumstances, with an 
estimated average of 5 hours.
    Estimated number of respondents and recordkeepers: 15,000.
    Estimated frequency of responses: once in the existence of each 
respondent.

Background

    Final regulations under section 1221, published elsewhere in this 
issue of the Federal Register, generally provide for ordinary gain or 
loss from hedging transactions. To qualify as a hedging transaction, a 
transaction must be entered into in the normal course of business to 
reduce certain specified risks of the taxpayer. Final regulations under 
section 446, published elsewhere in this issue of the Federal Register, 
require taxpayers to account for hedging transactions in a manner that 
clearly reflects income by reasonably matching the timing of income, 
deduction, gain, or loss from the hedge with the timing of the income, 
deduction, gain, or loss from the item being hedged.
    Because a hedging transaction must reduce the taxpayer's own risk, 
the regulations do not apply where a taxpayer hedges the risk of 
another taxpayer, even if that other taxpayer is a related party. In 
the preamble to TD 8493, which was published on October 20, 1993 (58 FR 
54037), the IRS requested comments on the treatment of transactions 
involving related parties.
    Several commentators suggested extending the definition of hedging 
transaction to the hedging of a related party's risk. Many businesses 
that are conducted through separate but related entities centralize 
their hedging operations in a single entity or a small number of 
entities that hedge the risks of the entire business. Centralizing the 
hedging function creates economies of scale and allows the risks of the 
business to be netted or offset against each other, with the hedging 
entity entering into hedges with unrelated parties only for the 
remaining net risk. Thus, various commentators suggested that the term 
hedging transaction should include hedges of the risk of other members 
of the same consolidated group, of affiliated corporations filing 
separate returns, of controlled but unaffiliated corporations, and of 
controlled partnerships.

Explanation of Provisions

    As a general rule, the proposed regulations adopt a single-entity 
approach to consolidated groups, applying the hedging rules to a 
member's transactions that hedge the risk of other members of the same 
consolidated group. Proposed Sec. 1.1221-2(d)(1) provides that the risk 
of one member of a consolidated group is treated for purposes of the 
hedging rules as the risk of the other members of the group as if all 
of the members of the group were divisions of a single corporation. 
Thus, if a transaction entered into by a centralized hedging member 
reduces the risk of the group as a whole and the other requirements of 
Sec. 1.1221-2 are met, the transaction qualifies as a hedging 
transaction.
    Many consolidated groups that centralize their hedging operations 
execute contracts or enter into other transactions between the members 
to transfer risk from the operating members to the hedging member. For 
example, an operating member that assumes a floating rate liability may 
enter into an interest rate swap with the hedging member pursuant to 
which the operating member will pay fixed and receive floating. The 
hedging member nets this risk with its other interest rate risk and, if 
it has a net risk, may enter into an interest rate swap with a third 
party to offset this net risk.
    Under the single-entity approach of the proposed regulations, 
transactions between members of a consolidated group are not hedging 
transactions because they do not reduce the risk of the group. Instead, 
these transactions are subject to the rules of section 1502 and the 
regulations thereunder, which govern the timing and character of income 
on intercompany transactions and obligations. Thus, only a transaction 
with a third party can qualify as a hedging transaction.
    Several commentators on the proposed character and timing 
regulations requested that the IRS adopt a separate-entity regime for 
related-party hedges. They expressed concern that, under a single-
entity regime, a hedging member may not have the information necessary 
to comply with the identification requirements imposed on hedging 
transactions. That is, the hedging member may not have information with 
respect to the transaction that gave rise to the risk that was 
transferred to it in the intercompany transaction.
    Under a separate-entity approach, an intercompany transaction that 
met the definition in Sec. 1.1221-2(b) would be respected as a hedging 
transaction and accounted for as such, and the transaction would not be 
subject to the intercompany transaction regime. In other words, if a 
member of a consolidated group enters into a transaction to transfer 
risk to another member, the transaction would be treated as if it had 
been entered into with an unrelated party.
    The IRS and Treasury recognize that, where a consolidated group 
uses intercompany transactions to transfer risk within the group, the 
separate-entity approach may facilitate the identification of hedging 
transactions and simplify the accounting for those transactions. A 
generally applicable separate-entity approach, however, frequently 
would not clearly reflect the income of the consolidated group and 
might be subject to manipulation. Moreover, a general separate-entity 
approach for hedges would be contrary to the single-entity approach of 
recently proposed Sec. 1.1502-13, and it would be difficult to 
coordinate the treatment of intercompany hedging transactions with the 
treatment of other intercompany transactions.
    Despite the concern with a general separate-entity approach, the 
IRS and Treasury believe that there is less opportunity for 
manipulation or distortion if a member of a group enters into a hedging 
transaction with another member that is using mark-to-market accounting 
for tax purposes. Thus, when a group contains a hedging member that 
accounts for the transaction on a mark-to-market method of accounting, 
a limited separate-entity approach may be acceptable.
    Therefore, the proposed regulations allow a consolidated group to 
make a separate-entity election. The election is made by the group for 
all of its hedging activities and may not be revoked without the 
consent of the Commissioner. If a group makes the election, the risk of 
one member is not treated as risk of the other members. Thus, a member 
can hedge only its own risk, and an intercompany transaction must be 
used if one member of the group wishes to transfer risk to another 
member.
    In an electing group, certain intercompany transactions are 
recognized as hedging transactions for purposes of Sec. 1.1221-2. An 
intercompany transaction is treated as a hedging transaction if it 
would be a hedging transaction if entered into with an unrelated party, 
and if it is entered into with another member that, under its method of 
accounting, marks the position to market. Thus, for example, an 
operating member could enter into a hedging transaction with a hedging 
member that marks the position obtained to market under section 475. As 
a result of the separate-entity election, the hedging transaction is 
not treated as an intercompany transaction or obligation for purposes 
of section 1502 and the regulations thereunder, and any gain or loss to 
the member marking to market the position obtained is ordinary.
    This special treatment is provided only for intercompany 
transactions entered into with a member that marks its position to 
market. If an identical transaction is entered into with a member of 
the group that does not mark to market the position obtained, the 
transaction is subject to the intercompany transaction rules under 
section 1502. Thus, the separate-entity election is likely to be made 
only by a group whose intercompany hedging activity is done with a 
member that uses a mark-to-market method of accounting.
    The proposed regulations provide identification rules that conform 
to the treatment of hedging transactions described above. If a 
consolidated group is under the general rule of the regulations (the 
single-entity approach), identification is done as if the members of 
the group were divisions of a single corporation. The member engaging 
in a hedging transaction with an unrelated party identifies the 
transaction and the item, items, or aggregate risk being hedged, even 
if the item, items, or aggregate risk is that of another member.
    If a group is under the general rule but uses intercompany 
transactions to transfer risk within the group, it may satisfy the 
identification requirement by identifying the item, items, or aggregate 
risk being hedged, its intercompany transactions, and its hedging 
transactions with unrelated parties. Although the intercompany 
transactions are not respected as hedging transactions, their 
identification should enable the group to associate hedging 
transactions with the item, items, or aggregate risk being hedged.
    If a group makes the separate-entity election, each member must 
identify its hedging transactions with unrelated parties, its 
intercompany transactions that are treated as hedging transactions 
under these regulations, and the item, items, or aggregate risk being 
hedged, as appropriate.
    The proposed regulations also provide rules with respect to the 
effects of identification and nonidentification. If a group is under 
the general rule, the rules of Sec. 1.1221-2(f) apply to a hedging 
transaction, but not to intercompany transactions. If a group makes the 
separate-entity election, the rules of Sec. 1.1221- 2(f) are extended 
to intercompany transactions that are treated as hedging transactions 
under these regulations.
    Finally, the proposed regulations provide new rules with respect to 
timing under Sec. 1.446-4. If a group is under the general rule, it 
accounts for hedging transactions as if the members of the group were 
divisions of a single corporation. The income, deduction, gain, or loss 
on a hedging transaction is matched with the income, deduction, gain, 
or loss on the item, items, or aggregate risk being hedged and not with 
an intercompany transaction. If a group makes the separate-entity 
election, the rules of Sec. 1.446-4 apply on a member-by-member basis 
to hedging transactions with unrelated parties and to intercompany 
transactions that are treated as hedging transactions under these 
regulations.
    It is anticipated that these regulations will apply to transactions 
entered into on or after the date that is 60 days after the publication 
of final regulations on this subject in the Federal Register.
    All of the rules described above apply only in the case of a 
consolidated group. Thus, the proposed regulations do not treat as a 
hedging transaction the hedging of the risk of a related party that is 
not a member of the same consolidated group. The IRS is concerned that 
the single-entity approach is generally not appropriate where the 
parties are not members of the same consolidated group.
    Outside the context of a consolidated group, taxpayers with 
ordinary business risk sometimes enter into transactions to transfer 
risk to a related party. Commentators have requested that these 
transactions be treated as hedging transactions and that the entities 
to which risk is transferred be treated as realizing ordinary gain or 
loss on their positions in these transactions. The IRS is concerned, 
however, about whether these transactions reduce risk, whether the 
requested ordinary treatment to the entities receiving risk is 
authorized under the Internal Revenue Code (Code), and whether the 
approach would create opportunities for manipulation. Therefore, the 
proposed regulations do not include the requested rule.
    The IRS intends to issue guidance under section 475 of the Code to 
coordinate the hedging exception of section 475(b)(1)(C) with these 
rules. In particular, if a consolidated group has not made a separate-
entity election, the IRS is considering whether the identification of a 
hedging transaction by a member subject to section 475 should generally 
be sufficient to identify the transaction as a hedge under section 
475(b)(1)(C), provided the hedged item or items are not securities 
subject to section 475(a). In this case, gain or loss on the hedging 
transaction would generally be subject to the timing rules of 
Sec. 1.446-4 rather than to mark-to-market treatment under section 475. 
Comments are requested on this matter.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It also has been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply to these regulations, and, therefore, a Regulatory 
Flexibility Analysis is not required. Pursuant to section 7805(f) of 
the Internal Revenue Code, this notice of proposed rulemaking will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for Tuesday, October 18, 1994, 
at 10:00 a.m. in room 3718, 1111 Constitution Avenue, NW., Washington, 
DC, 20224. Because of access restrictions, visitors will not be 
admitted beyond the Internal Revenue Building lobby more than 15 
minutes before the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit written comments by September 26, 1994, and submit an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by September 26, 1994.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Jo Lynn Ricks, Office 
of Assistant Chief Counsel (Financial Institutions and Products). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by 
removing the entry for Sec. 1.1221-2 and by adding entries in numerical 
order to read as follows:

    Authority: 26 U.S.C. 7805 * * *

    Section 1.446-4 also issued under 26 U.S.C. 1502. * * *
    Section 1.1221-2 also issued under 26 U.S.C. 1502 and 6001. * * *
    Par. 2. Section 1.446-4 is amended by adding the text of paragraph 
(e)(9) to read as follows:


Sec. 1.446-4  Hedging transactions.

* * * * *
    (e) * * *
    (9) Hedging by members of a consolidated group--(i) General rule. 
In general, a member of a consolidated group that hedges the risk of 
another member must account for its hedging transactions as if all of 
the members were separate divisions of a single corporation. Thus, the 
timing of the income, deduction, gain, or loss on a hedging transaction 
must be matched with the timing of income, deduction, gain, or loss 
from the item or items being hedged rather than with an intercompany 
transaction.
    (ii) Separate-entity election. If a consolidated group makes an 
election under Sec. 1.1221-2(d)(2), each member of the consolidated 
group must account for its hedging transactions (including its 
intercompany transactions that are treated as hedging transactions) in 
a manner that meets the requirements of paragraph (b) of this section. 
Thus, each member of the group must comply with this section for its 
hedging transactions without regard to the fact that the taxpayer is a 
member of a consolidated group.
    (iii) Definitions. For definitions of consolidated group, member of 
a consolidated group, and intercompany transaction, see section 1502 
and the regulations thereunder.
    (iv) Effective date. This paragraph (e)(9) applies to transactions 
entered into on or after the date 60 days after publication of final 
regulations on this subject in the Federal Register.
    Par. 3. Section 1221-2 is amended by adding the text of paragraphs 
(d), (e)(5), (f)(3), and (g)(4) to read as follows:


Sec. 1.1221-2   Hedging transactions.

* * * * *
    (d) Hedging by members of a consolidated group--(1) General rule. 
For purposes of this section, the risk of one member of a consolidated 
group is treated as the risk of the other members as if all of the 
members of the group were divisions of a single corporation. For 
example, if any member of a consolidated group hedges the risk of 
another member of the group by entering into a transaction with an 
unrelated person, that transaction may potentially qualify as a hedging 
transaction. Under this rule, intercompany transactions are not hedging 
transactions because they are treated as transactions between divisions 
of a single corporation and thus do not reduce the risk of the group.
    (2) Separate-entity election. In lieu of the treatment specified in 
paragraph (d)(1) of this section, a consolidated group may elect 
separate-entity treatment of its hedges. If a group makes this 
separate-entity election, the following rules apply.
    (i) Risk of one member not risk of other members. Notwithstanding 
paragraph (d)(1) of this section, the risk of one member is not treated 
as the risk of other members.
    (ii) Intercompany transactions. An intercompany transaction or 
obligation is a hedging transaction with respect to a member of a 
consolidated group if and only if it meets the following requirements--
    (A) The position of the member in the intercompany transaction or 
obligation would qualify as a hedging transaction with respect to that 
member if that member entered into the transaction with an unrelated 
party; and
    (B) The position of the other member (the marking member) in the 
transaction is marked to market under the marking member's method of 
accounting.
    (iii) Treatment of intercompany hedging transactions. An 
intercompany transaction or obligation that is a hedging transaction 
(because it meets the requirements of paragraphs (d)(2)(ii) (A) and (B) 
of this section) is treated as follows--
    (A) Neither the hedging transaction nor any intercompany obligation 
with respect to that transaction is treated as an intercompany 
transaction or obligation for purposes of section 1502 and the 
regulations thereunder; and
    (B) Except as provided in paragraph (f)(3) of this section, the 
character of the marking member's gain or loss from the transaction is 
ordinary.
    (iv) Making and revoking the election. The election described in 
this paragraph (d)(2) must be made in a separate statement that is 
filed with the group's consolidated return for the taxable year that 
includes the first date for which the election is to apply. The 
statement must specify that the election is being made and must 
indicate the date that the election is to be effective. The election 
applies to all transactions entered into on or after the date so 
indicated. In no event, however, does the election apply to 
transactions entered into before the date 60 days after final 
regulations on this subject are published in the Federal Register. The 
election cannot be revoked without the consent of the Commissioner.
    (3) Definitions. For definitions of consolidated group, member of a 
consolidated group, intercompany transaction, and intercompany 
obligation, see section 1502 and the regulations thereunder.
    (4) Examples. These examples illustrate this paragraph (d). In 
these examples, O and H are members of the same consolidated group. O's 
business operations give rise to interest rate risk ``A,'' which O 
wishes to hedge. O enters into an intercompany transaction with H that 
transfers the risk to H. O's position in the intercompany transaction 
is ``B,'' and H's position in the contract is ``C.'' H enters into 
position ``D'' with a third party to reduce the interest rate risk it 
has with respect to its position C. D would be a hedging transaction 
with respect to risk A if O's risk A were H's risk.

    Example 1. Single-entity treatment--(i) General rule. Under 
paragraph (d)(1) of this section, O's risk A is treated as H's risk, 
and therefore D is a hedging transaction with respect to risk A. 
Thus, the character of D is determined under the rules of this 
section, and D must be accounted for under a method of accounting 
that satisfies Sec. 1.446-4. The intercompany transaction B-C is not 
a hedging transaction, and the B-C transaction is accounted for 
according to the regulations under section 1502.
    (ii) Identification. D must be identified as a hedging 
transaction under paragraph (e)(1) of this section, and A must be 
identified as the hedged item under paragraph (e)(2) of this 
section. Under paragraph (e)(5) of this section, the identification 
of A as the hedged item can be accomplished by identifying the 
positions in the intercompany transaction as hedges or hedged items, 
as appropriate. Thus, substantially contemporaneously with entering 
into D, H may identify C as the hedged item and O may identify B as 
a hedge and A as the hedged item.
    Example 2. Separate-entity election; no marking. In addition to 
the facts stated above, assume that the group makes a separate-
entity election under paragraph (d)(2) of this section. If H does 
not mark C to market under its method of accounting, then B is not a 
hedging transaction, and the B-C intercompany transaction is 
accounted for under the rules of section 1502. D is not a hedging 
transaction with respect to A, but D may be a hedging transaction 
with respect to C if the requirements of paragraph (b) of this 
section are met. If D is not part of a hedging transaction, then D 
may be part of a straddle for purposes of section 1092.
    Example 3. Separate-entity election; marking. The facts are the 
same as in Example 2 above. If H marks C to market under its method 
of accounting and B would be a hedging transaction with respect to O 
if O had entered into that transaction with an unrelated party, then 
the B-C transaction is a hedging transaction with respect to O. 
Thus, O's position B is a hedging transaction with respect to its 
risk A, the B-C transaction is not treated as an intercompany 
transaction or obligation, and H's income, deduction, gain or loss 
on C is ordinary. D is a hedge of C if it meets the requirements of 
paragraph (b) of this section.

    (e) * * *
    (5) Identification of hedges involving members of the same 
consolidated group--(i) General rule. If one member of a consolidated 
group hedges the risk of another member under the general rule of 
paragraph (d)(1) of this section, then the identification requirements 
of this paragraph (e) must be met as if all of the members of the group 
were divisions of a single corporation. Thus, the member entering into 
the hedging transaction with a third party must identify the hedging 
transaction under paragraph (e)(1) of this section. Under paragraph 
(e)(2) of this section, that member must also identify the item, items, 
or aggregate risk that is being hedged, even if the item, items, or 
aggregate risk relates primarily or entirely to other members of the 
group. If the members of a group use intercompany transactions or 
obligations to transfer risk within the group, the requirements of 
paragraph (e)(2) of this section may be met by identifying the 
intercompany transactions or obligations as hedges or hedged items, as 
appropriate. Because identification of the intercompany transaction as 
a hedge serves solely to identify the hedged item, the identification 
is timely if made within the period required by paragraph (e)(2) of 
this section. For example, if a member transfers risk in an 
intercompany transaction, it may identify under the rules of this 
paragraph (e) both its position in that transaction and the item, 
items, or aggregate risk being hedged. The member that hedges the risk 
outside the group may identify under the rules of this paragraph (e) 
both its position with the third party and its position in the 
intercompany transaction. See paragraph (d)(4) of this section for an 
example of this identification.
    (ii) Rule for taxpayers making the separate-entity election. If a 
consolidated group makes the separate-entity election under paragraph 
(d)(2) of this section, each member of the group must satisfy the 
requirements of this paragraph (e) as though it were not a member of a 
consolidated group.
* * * * *
     (f) * * *
    (3) Transactions by members of a consolidated group--(i) General 
rule. If a consolidated group is under the general rule of paragraph 
(d)(1) of this section, the rules of this paragraph (f) apply only to 
hedging transactions and not to intercompany transactions.
    (ii) Separate-entity election. If a consolidated group has made the 
election under paragraph (d)(2) of this section, then, in addition to 
the rules of paragraphs (f)(1) and (f)(2) of this section, the 
following rules apply.
    (A) If an intercompany transaction is identified as a hedging 
transaction but does not meet the requirements of paragraphs (d)(2)(ii) 
(A) and (B) of this section, then both parties to the transaction are 
subject to the rules of paragraph (f)(1) of this section with respect 
to the transaction as though both had identified their positions in the 
transaction as hedging transactions, notwithstanding the regulations 
under section 1502.
    (B) If a transaction that meets the requirements of paragraphs 
(d)(2)(ii) (A) and (B) is not identified as a hedging transaction, then 
both parties to the transaction are subject to the rules of paragraph 
(f)(2).
    (g) * * *
    (4) Effective date for hedges by members of a consolidated group. 
Paragraphs (d), (e)(5), and (f)(3) of this section apply to 
transactions entered into on or after the date that is 60 days after 
publication of final regulations in the Federal Register.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-16869 Filed 7-13-94; 9:10 am]
BILLING CODE 4830-01-U