In final regulations (TD 9897) issued on 13 May 2020 (the 2020 Final Regulations), the United States (US) Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) finalized proposed regulations (81 FR 72751) (the 2016 Proposed Regulations) that provide guidance for applying the Internal Revenue Code1 Section 385 regulations to qualified short-term debt instruments, transactions involving controlled partnerships and transactions involving consolidated groups.BackgroundOverview of the 2016 RegulationsFinal, temporary and proposed regulations under Section 385 were issued in 2016. The 2016 regulations contained rules in Treas. Reg. Sections 1.385-1, 1.385-3, 1.385-3T and 1.385-4T (the Distribution Regulations) that recharacterize a debt instrument issued by...