On October 13, the Treasury released highly anticipated final and temporary regulations (T.D. 9790) under Section 385,

which authorizes the Treasury to devise regulations to determine when an interest in a corporation is treated for federal

tax purposes as debt, stock, or part debt and part stock. In early April, the Treasury had issued proposed regulations,

which generally were not well-received by taxpayers and practitioners. Some questioned the Treasury’s authority to

issue rules that included per se grounds for recharacterizing purported debt, rather than employing the factor-based

approach in the Code. Others complained of overbreadth, citing the proposed rules’ potential coverage of routine

transactions like cash-pooling arrangements.