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Abstract
Many alternative investment (AI)funds trade debt instruments for the benefit of their own account. As AI funds have increased the breadth of their investments into nontraditional areas, they have also expanded the diversity of their investments overseas (including expanding the contingent of issuers of the debt instruments from which they may buy). Compliance with US tax rules and the impact on a US investor is likely not a focus of a foreign issuer, and asset managers (both domestic and foreign) are often caught off-guard by the nuanced rules that regulate the type of issuance, and form in which, bearer bonds are offered. Hence, a clearer understanding of the characterization of such bonds for US tax purposes and the resulting potential impact on the character and timing of the gain or loss is imperative. Over the past few years, the IRS and Treasury have been issuing guidance and expanding the definition of registered obligations.