SECTION 5. AFSI DETERMINATION

RESPECTS CONGRESSIONAL “FRESH START”

.01 Purpose . The Treasury Department and the IRS anticipate that the forthcom­ ing proposed regulations will be consistent with the guidance provided in this section 5. The Treasury Department and the IRS are providing this interim guidance to as­ sist the Fresh Start Entities in applying the CAMT to certain transactions occurring prior to the issuance of the forthcoming proposed regulations.

.02 Respecting Congressional “Fresh Start” for Determining AFSI .

(1) For purposes of determining AFSI of a Fresh Start Entity described in sec­ tion 2.04(1) of this notice (and any suc­ cessor(s) under § 381), the adjusted basis

rules provided in § 177(d)(2) of the 1984 Act apply with respect to any asset held by the Fresh Start Entity since January 1, 1985. (2) For purposes of determining AFSI of a Fresh Start Entity described in sec­ tion 2.04(2) or (3) of this notice (and any successor(s) under § 381), the gain or loss (but not depreciation, amortization, or other amounts) for any asset held by the Fresh Start Entity since the first day of its first taxable year beginning after the test­ ing date is determined using its adjusted tax basis for such asset. For purposes of the previous sentence, the term testing date means December 31, 1986, in the case of a Fresh Start Entity described in section 2.04(2) of this notice, and Decem­ ber 31, 1997, in the case of a Fresh Start Entity described in section 2.04(3) of this notice.