The Internal Revenue Service has issued a new revenue procedure that aims to clear up some of the murkiness surrounding subprime loans and the tax treatment of securitized versions of those loans, though the murkiness is likely to remain for the majority of those loans anyway.

Revenue Procedure 2008-47 describes conditions under which changes to certain subprime mortgage loans will not cause the IRS to challenge the tax status of some of the securitization vehicles holding the loans or assert that those modifications create a tax liability on a prohibited transaction.

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