# Prop. Treas. Reg. § 1.988-1: Certain definitions and special rules.

Proposed regulation, not in force. REG-111283-11, 76 FR 57684, published 2011-09-16 <https://www.federalregister.gov/documents/2011/09/16/2011-23665/swap-exclusion-for-section-1256-contracts>. Interprets 26 U.S.C. § 988.

Par. 6. Section 1.988-1 is amended by: 1. Revising paragraph (a)(2)(iii)(B)( 2 ). 2. Adding two sentences to the end of paragraph (a)(2)(iii)(C). The revision and addition read as follows:

(a) * * *

(2) * * *

(iii) * * *

(B) * * *

( 2 ) Definition of notional principal contract. Generally, the term “notional principal contract” means a contract defined in § 1.446-3(c). However, a “notional principal contract” shall only be considered as described in paragraph (a)(2)(iii)(B)( 1 ) of this section if the underlying property to which the instrument ultimately relates is money (for example, functional currency), nonfunctional currency, or property the value of which is determined by reference to an interest rate. Thus, the term “notional principal contract” includes a currency swap as defined in § 1.988-2(e)(2)(ii), but does not include a swap referenced to a commodity or equity index.

(C) * * * The rules of this paragraph (a)(2)(iii) apply to notional principal contracts as defined in § 1.446-3(c) that are entered into on or after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . Section 1.988-1(a)(2)(iii) as contained in 26 CFR part 1 revised April 1, 2011, continues to apply to notional principal contracts entered into before the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register .

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