On 7 January 2011, the IRS published fi nal regulations intended to clarify when and how a debt instrument should be retested for debt vs. equity status, and when its terms have been signifi cantly modifi ed. The fi nal regulations generally apply to alterations of the terms of a debt instrument on or after 7 January 2011. Upon a signifi cant modifi cation there is a deemed retirement of the existing debt instrument and a deemed issuance of a new instrument (which may or may not be debt). The fi nal regulations clarify that the new instrument must be analyzed to determine whether it is debt or equity. All relevant factors other than any deterioration in the fi nancial condition of the issuer are taken into account. However, if there is a substitution of a new obligor or the addition or deletion of a co-obligor, all factors, including the deterioration in the fi nancial condition of the issuer, are taken into account.