[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.40-1]

[Page 111-112]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.40-1  Questions and answers relating to the meaning of the term ``qualified mixture'' in section 40(b)(1).

    Q-1. What is a ``qualified mixture'' within the meaning of section 
40(b)(1)?
    A-1. A ``qualified mixture'' is a mixture of alcohol and gasoline or 
of alcohol and special fuel which (1) is sold by the taxpayer producing 
such mixture to any person for use as a fuel, or (2) is used as a fuel 
by the taxpayer producing such mixture.
    Q-2. Must alcohol be present in a product in order for that product 
to be considered a mixture of alcohol and either gasoline or a special 
fuel?
    A-2. No. A product is considered to be a mixture of alcohol and 
gasoline or of alcohol and a special fuel if the product is derived from 
alcohol and either gasoline or a special fuel even if the alcohol is 
chemically transformed in producing the product so that the alcohol is 
no longer present as a separate chemical in the final product, provided 
that there is no significant loss in the energy content of the alcohol. 
Thus, a

[[Page 112]]

product may be considered to be ``mixture of alcohol and gasoline or of 
alcohol and a special fuel'' within the meaning of section 40(b)(1)(B) 
if such product is produced in a chemical reaction between alcohol and 
either gasoline or a special fuel. Similarly a product may be considered 
to be a ``mixture of alcohol and gasoline or of alcohol and a special 
fuel'' if such product is produced by blending a chemical compound 
derived from alcohol with either gasoline or a special fuel.
    Thus, for example, a blend of gasoline and ethyl tertiary butyl 
ether (ETBE), a compound derived from ethanol (a qualified alcohol), in 
a chemical reaction in which there is no significant loss in the energy 
content of the ethanol, is considered for purposes of section 
40(b)(1)(B) to be a mixture of gasoline and the ethanol used to produce 
the ETBE, even though the ethanol is chemically transformed in the 
production of ETBE and is not present in the final product.

[T.D. 8291, 55 FR 8948, Mar. 9, 1990]