In a debt-for-debt exchange, the tax consequences to the borrower and holder depend on the "issue price" of the new debt, which in turn depends on whether the old or new debt is "publicly traded," i.e., traded on an established market. The IRS recently released proposed regulations addressing when property is treated as publicly traded for purposes of determining the issue price of a debt instrument. If finalized as proposed, the regulations would significantly expand the current definition of "publicly traded." When finalized, the proposed regulations will apply to debt instruments issued on or after the date the final regulations are published in the Federal Register. Observations: The existing 1.1273-2 regulations, issued in 1994, are difficult to apply to modern financial markets. The proposed regulations would provide welcome guidance on one debt restructuring issue needing clarification. However, they would not resolve the cancellation of indebtedness (COD) income and "AHYDO" interest limitation issues that borrowers now face in distressed debt restructurings in light of the expiration of the relief granted by sections 108(i) and 163(e)(5)(F).