Blake Rubin was quoted on November 6 in Federal Tax Weekly about how the proposed regs under Code Sec. 108(e)(8) would apply the nonrecognition rule of Code Sec. 721 to the creditor's exchange of debt for a partnership interest. Mr. Rubin commented "the position taken in these regs that, from the lender's perspective, Section 721 applies, will be very controversial. The effect is to disallow a loss to the lender. When the lender ultimately recognizes its loss on sale of the partnership interest or liquidation of the partnership, its loss will be capital." He continued, "Ironically, the parties would be in the identical economic position but the lender would recognize an immediate loss if the partnership repaid part of the loan, the lender cancelled the balance and recognized a loss, and the lender then recontributed the funds to the partnership in exchange for a partnership interest."