[4830-01-u]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-242996-96]
RIN  1545-AU45 
Inflation-Indexed Debt Instruments
AGENCY:  Internal Revenue Service (IRS), Treasury.
ACTION:  Notice of proposed rulemaking by cross-reference to
temporary regulations and notice of public hearing.
SUMMARY:  In the Rules and Regulations section of this issue of
the Federal Register, the IRS is issuing temporary regulations
relating to the federal income tax treatment of inflation-indexed
debt instruments, including Treasury Inflation-Indexed
Securities.  The text of the temporary regulations also serves as
the text of the proposed regulations.  This document also
provides notice of a public hearing on the proposed regulations.
DATES:  Comments must be received by April 7, 1997.  Requests to
appear and outlines of topics to be discussed at the public
hearing scheduled for April 30, 1997, at 10 a.m. must be received
by April 9, 1997.
ADDRESSES:  Send submissions to:  CC:DOM:CORP:R (REG-242996-96),
room 5226, Internal Revenue Service, POB 7604, Ben Franklin
Station, Washington, DC 20044.  Submissions may be hand delivered
between the hours of 8 a.m. and 5 p.m. to:  CC:DOM:CORP:R (REG-
242996-96), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue NW, Washington, DC.  Alternatively, taxpayers
may submit comments electronically via the internet by selecting
the "Tax Regs" option of the IRS Home Page or by submitting
comments directly to the IRS internet site at
http://www.irs.ustreas.gov/prod/tax_regs/comments.html.  A public
hearing will be held in the NYU Classroom, room 2615, Internal
Revenue Building, 1111 Constitution Avenue NW, Washington, DC.
FOR FURTHER INFORMATION CONTACT:  Concerning the regulations,
William E. Blanchard, (202) 622-3950, or Jeffrey W. Maddrey,
(202) 622-3940; concerning submissions and the hearing, Mike
Slaughter, (202) 622-7190 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
     Temporary regulations in the Rules and Regulations section
of this issue of the Federal Register amend the Income Tax
Regulations (26 CFR part 1) relating to sections 1275 and 1286 of
the Internal Revenue Code.  The temporary regulations provide
rules relating to inflation-indexed debt instruments, including
Treasury Inflation-Indexed Securities.
    The text of the temporary regulations also serves as the
text of the proposed regulations.  The preamble to the temporary
regulations explains the temporary regulations.
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) does not apply
to these regulations and, because the regulations do not impose a
collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply.  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 comments that are
submitted timely (in the manner described in the ADDRESSES
portion of this preamble) to the IRS.  All comments will be
available for public inspection and copying.
    A public hearing has been scheduled for April 30, 1997, at
10 a.m. in the NYU Classroom, room 2615, Internal Revenue
Building, 1111 Constitution Avenue NW, Washington, DC.  Because
of access restrictions, visitors will not be admitted beyond the
building lobby more than 15 minutes before the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons who wish to present oral comments at the hearing
must submit comments by April 7, 1997, and submit an outline of
the topics to be discussed and the time to be devoted to each
topic by April 9, 1997.
    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 William E.
Blanchard, Office of Assistant Chief Counsel (Financial
Institutions and Products).  However, other personnel from the
IRS and the 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 adding two entries in numerical order to read as follows:
    Authority:  26 U.S.C. 7805 * * *
Section 1.1275-7 also issued under 26 U.S.C. 1275(d).  * * *
Section 1.1286-2 also issued under 26 U.S.C. 1286(f).  * * *
    Par. 2.  Section 1.1275-7 is added to read as follows:
1.1275-7  Inflation-indexed debt instruments.
    [The text of this proposed section is the same as the text
of 1.1275-7T published elsewhere in this issue of the Federal
Register.]
    Par. 3.  Section 1.1286-2 is added to read as follows:
1.1286-2  Inflation-indexed debt instruments.
    [The text of this proposed section is the same as the text
of 1.1286-2T published elsewhere in this issue of the Federal
Register.]



                             Commissioner of Internal Revenue