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Article: New 'shadow box' deals may be result of IRS foot-dragging on gray boxes. (companies that serve as bond insurance fronts to earn arbitrage, Internal Reveue Service's lack of arbitrage rules for tax-exempt bond credit enhancers) (Washington Watch) (Column)
- Article from:
- The Bond Buyer
- Article date:
- August 24, 1992
- Author:
CopyrightCOPYRIGHT 1992 SourceMedia, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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WASHINGTON -- if you ignore a potential problem, it may turn into something worse.
That's what the Internal Revenue Service appears to have done with so-called gray box tax-exempt bond deals in which a credit enhancer ends up with money it can invest without regard to arbitrage restrictions.
In the nearly two years since the controversial gray box structure first surfaced, the IRS has failed to give market participants any formal guidance whether such deals may skirt the government's arbitrage or other tax rules.
Although the IRS started studying gray boxes 18 months ago and reportedly was considering issuing a revenue ruling on their ...