19 September 2008 Internal T.I. 2008-0272441I7 - GUILT LOCK DERIVATIVE -- summary under Timing

Under a "gilt lock" hedge, the taxpayer, between the time of deciding to issue the bonds and the time of actually issuing them would hedge against the change in price of the bonds in order to lock in its effective interest cost. For accounting purposes, it was permitted to amortize the payment made or received under such hedge over the term of the borrowing as an adjustment to the interest rate cost. This treatment also would be appropriate for tax purposes.