I.R.C. § 1092(a) Recognition Of Loss In Case Of Straddles, Etc.
I.R.C. § 1092(a)(1) Limitation On Recognition Of Loss
I.R.C. § 1092(a)(1)(A) In General —
Any loss with respect to 1 or more positions shall be taken into account for any
taxable year only to the extent that the amount of such loss exceeds the unrecognized
gain (if any) with respect to 1 or more positions which were offsetting positions
with respect to 1 or more positions from which the loss arose.
I.R.C. § 1092(a)(1)(B) Carryover Of Loss —
Any loss which may not be taken into account under subparagraph (A) for any taxable
year shall, subject to the limitations under subparagraph (A), be treated as sustained
in the succeeding taxable year.
I.R.C. § 1092(a)(2) Special Rule For Identified Straddles
I.R.C. § 1092(a)(2)(A) In General —
In the case of any straddle which is an identified
straddle—
I.R.C. § 1092(a)(2)(A)(i) —
paragraph (1) shall not apply with respect to positions comprising the identified
straddle,
I.R.C. § 1092(a)(2)(A)(ii) —
if there is any loss with respect to any position of the identified straddle, the
basis of each of the offsetting positions in the identified straddle shall be increased
by an amount which bears the same ratio to the loss as the unrecognized
gain with respect to such offsetting position bears to the aggregate
unrecognized gain with respect to all such offsetting positions,
I.R.C. § 1092(a)(2)(A)(iii) —
if the application of clause (ii) does not result in an increase in the basis of any
offsetting position in the identified straddle, the basis of each of the offsetting
positions in the identified straddle shall be increased in a manner which—
I.R.C. § 1092(a)(2)(A)(iii)(I) —
is reasonable, consistent with the purposes of this paragraph, and consistently applied
by the taxpayer, and
I.R.C. § 1092(a)(2)(A)(iii)(II) —
results in an aggregate increase in the basis of such offsetting positions which is
equal to the loss described in clause (ii), and
I.R.C. § 1092(a)(2)(A)(iv) —
any loss described in clause (ii)
shall not otherwise be taken into account for purposes of this title.
I.R.C. § 1092(a)(2)(B) Identified Straddle —
The term “identified straddle” means any straddle—
I.R.C. § 1092(a)(2)(B)(i) —
which is clearly identified on the taxpayer's records as an identified straddle
before the earlier of—
I.R.C. § 1092(a)(2)(B)(i)(I) —
the close of the day on which the straddle is acquired, or
I.R.C. § 1092(a)(2)(B)(i)(II) —
such time as the Secretary may prescribe by regulations.
I.R.C. § 1092(a)(2)(B)(ii) —
to the extent provided by regulations, the value of each position of which (in
the hands of the taxpayer immediately before the creation of the straddle) is not
less than the basis of such position in the hands of the taxpayer at the time the
straddle is created, and
I.R.C. § 1092(a)(2)(B)(iii) —
which is not part of a larger straddle.
A straddle shall be treated as clearly identified for purposes of clause (i) only
if such identification includes an identification of the positions in the straddle
which are offsetting with respect to other positions in the straddle.
I.R.C. § 1092(a)(2)(C) Application To Liabilities And Obligations —
Except as otherwise provided by the Secretary, rules similar to the rules of clauses
(ii) and (iii) of subparagraph (A)
shall apply for purposes of this paragraph with respect to any position which is,
or has been, a liability or obligation.
I.R.C. § 1092(a)(2)(D) Regulations —
The Secretary shall prescribe such regulations or other guidance as may be necessary
or appropriate to carry out the purposes of this paragraph. Such regulations or
other guidance may specify the proper methods for clearly identifying a straddle
as an identified straddle (and for identifying the positions comprising such straddle),
the rules for the application of this section to a taxpayer which fails to comply
with those identification requirements, the rules for the application of this section
to a position which is or has been a liability or obligation, methods of loss allocation
which satisfy the requirements of subparagraph (A)(iii), and the ordering
rules in cases where a taxpayer disposes (or otherwise ceases to be the holder) of
any part of any position which is part of an
identified straddle.
I.R.C. § 1092(a)(3) Unrecognized Gain —
For purposes of this subsection—
I.R.C. § 1092(a)(3)(A) In General —
The term “unrecognized gain” means—
I.R.C. § 1092(a)(3)(A)(i) —
in the case of any position held by the taxpayer as of the close of the taxable
year, the amount of gain which would be taken into account with respect to such position
if such position were sold on the last business day of such taxable year at its fair
market value, and
I.R.C. § 1092(a)(3)(A)(ii) —
in the case of any position with respect to which, as of the close of the taxable
year, gain has been realized but not recognized, the amount of gain so realized.
I.R.C. § 1092(a)(3)(B) Special Rule For Identified Straddles —
For purposes of paragraph (2)(A)(ii), the unrecognized gain with respect to any
offsetting position shall be the excess
of the fair market value of the position at the time of the determination over the
fair market value of the position at the time the taxpayer identified the position
as a position in an identified straddle.
I.R.C. § 1092(a)(3)(C) Reporting Of Gain
I.R.C. § 1092(a)(3)(C)(i) In General —
Each taxpayer shall disclose to the Secretary, at such time and in such manner and
form as the Secretary may prescribe by regulations—
I.R.C. § 1092(a)(3)(C)(i)(I) —
each position (whether or not part of a straddle) with respect to which, as of the
close of the taxable year, there is unrecognized gain, and
I.R.C. § 1092(a)(3)(C)(i)(II) —
the amount of such unrecognized gain.
I.R.C. § 1092(a)(3)(C)(ii) Reports Not Required In Certain Cases —
Clause (i) shall not apply—
I.R.C. § 1092(a)(3)(C)(ii)(I) —
to any position which is part of an identified straddle,
I.R.C. § 1092(a)(3)(C)(ii)(III) —
with respect to any taxable year if no loss on a position (including a regulated
futures contract)
has been sustained during such taxable year or if the only loss sustained on such
position is a loss described in subclause (II).
I.R.C. § 1092(b) Regulations
I.R.C. § 1092(b)(1) In General —
The Secretary shall prescribe such regulations with respect to gain or loss on positions
which are a part of a straddle as may be appropriate to carry out the purposes of
this section and section 263(g). To the extent consistent with such purposes, such regulations shall include rules
applying the principles of subsections (a) and (d)
of section 1091 and of subsections (b) and (d) of section 1233.
I.R.C. § 1092(b)(2) Regulations Relating To Mixed Straddles
I.R.C. § 1092(b)(2)(A) Elective Provisions In Lieu Of Section 1233(d) Principles —
The regulations prescribed under paragraph (1) shall provide that—
I.R.C. § 1092(b)(2)(A)(i) —
the taxpayer may offset gains and losses from positions which are part of mixed
straddles—
I.R.C. § 1092(b)(2)(A)(i)(I) —
by straddle-by-straddle identification, or
I.R.C. § 1092(b)(2)(A)(i)(II) —
by the establishment (with respect to any class of activities) of a mixed straddle
account for which gains and losses would be recognized (and offset) on a periodic
basis,
I.R.C. § 1092(b)(2)(A)(ii) —
such offsetting will occur before the application of section 1256, and section 1256(a)(3) will only apply to net gain or net loss attributable to section 1256 contracts, and
I.R.C. § 1092(b)(2)(A)(iii) —
the principles of section 1233(d) shall not apply with respect to any straddle identified under clause (i)(I) or part
of an account established under clause (i)(II).
I.R.C. § 1092(b)(2)(B) Limitation On Net Gain Or Net Loss From Mixed Straddle Account —
In the case of any mixed straddle account referred to in subparagraph (A)(i)(II)—
I.R.C. § 1092(b)(2)(B)(i) Not More Than 50 Percent Of Net Gain May Be Treated As Long-Term Capital Gain —
In no event shall more than 50 percent of the net gain from such account for any
taxable year be treated as long-term capital gain.
I.R.C. § 1092(b)(2)(B)(ii) Not More Than 40 Percent Of Net Loss May Be Treated As Short-Term Capital Loss —
In no event shall more than 40 percent of the net loss from such account for any
taxable year be treated as short-term capital loss.
I.R.C. § 1092(b)(2)(C) Authority To Treat Certain Positions As Mixed Straddles —
The regulations prescribed under paragraph (1) may treat as a mixed straddle positions
not described in section 1256(d)(4).
I.R.C. § 1092(b)(2)(D) Timing And Character Authority —
The regulations prescribed under paragraph (1) shall include regulations relating
to the timing and character of gains and losses in case of straddles where at least
1 position is ordinary and at least 1 position is capital.
I.R.C. § 1092(c) Straddle Defined —
For purposes of this section—
I.R.C. § 1092(c)(1) In General —
The term “straddle” means offsetting positions with respect to personal
property.
I.R.C. § 1092(c)(2) Offsetting Positions
I.R.C. § 1092(c)(2)(A) In General —
A taxpayer holds offsetting positions with respect to personal property if there
is a substantial diminution of the taxpayer's risk of loss from holding any position
with respect to personal property by reason of his holding 1 or more other positions
with respect to personal property (whether or not of the same kind).
I.R.C. § 1092(c)(2)(B) Special Rule For Identified Straddles —
In the case of any position which is not part of an identified straddle (within
the meaning of subsection (a)(2)(B)), such position shall not be treated as offsetting
with respect to any position which is part of an identified straddle.
I.R.C. § 1092(c)(3) Presumption
I.R.C. § 1092(c)(3)(A) In General —
For purposes of paragraph (2), 2 or more positions shall be presumed to be offsetting
if—
I.R.C. § 1092(c)(3)(A)(i) —
the positions are in the same personal property (whether established in such property
or a contract for such property),
I.R.C. § 1092(c)(3)(A)(ii) —
the positions are in the same personal property, even though such property may be
in a substantially altered form,
I.R.C. § 1092(c)(3)(A)(iii) —
the positions are in debt instruments of a similar maturity or other debt instruments
described in regulations prescribed by the Secretary,
I.R.C. § 1092(c)(3)(A)(iv) —
the positions are sold or marketed as offsetting positions (whether or not such
positions are called a straddle, spread, butterfly, or any similar name),
I.R.C. § 1092(c)(3)(A)(v) —
the aggregate margin requirement for such positions is lower than the sum of the
margin requirements for each such position (if held separately), or
I.R.C. § 1092(c)(3)(A)(vi) —
there are such other factors (or satisfaction of subjective or objective tests)
as the Secretary may by regulations prescribe as indicating that such positions are
offsetting.
For purposes of the preceding sentence, 2 or more positions shall be treated as described
in clause (i), (ii), (iii), or (vi)
only if the value of 1 or more of such positions ordinarily varies
inversely with the value of 1 or more other such positions.
I.R.C. § 1092(c)(3)(B) Presumption May Be Rebutted —
Any presumption established pursuant to subparagraph
(A) may be rebutted.
I.R.C. § 1092(c)(4) Exception For Certain Straddles Consisting Of Qualified Covered Call Options And The
Optioned Stock
I.R.C. § 1092(c)(4)(A) In General —
If—
I.R.C. § 1092(c)(4)(A)(i) —
all the offsetting positions making up any straddle consist of 1 or more qualified
covered call options and the stock to be purchased from the taxpayer under such options,
and
I.R.C. § 1092(c)(4)(A)(ii) —
such straddle is not part of a larger straddle,
such straddle shall not be treated as a straddle for purposes of this section and
section 263(g).
I.R.C. § 1092(c)(4)(B) Qualified Covered Call Option Defined —
For purposes of subparagraph (A), the term “qualified covered call option”
means any option granted by the taxpayer to purchase stock held by the taxpayer (or
stock acquired by the taxpayer in connection with the granting of the option) but
only if—
I.R.C. § 1092(c)(4)(B)(i) —
such option is traded on a national securities exchange which is registered with
the Securities and Exchange Commission or other market which the Secretary determines
has rules adequate to carry out the purposes of this paragraph,
I.R.C. § 1092(c)(4)(B)(ii) —
such option is granted more than 30 days before the day on which the option expires,
I.R.C. § 1092(c)(4)(B)(iii) —
such option is not a deep-in-the-money option,
I.R.C. § 1092(c)(4)(B)(iv) —
such option is not granted by an options dealer (within the meaning of section 1256(g)(8)) in connection with his activity of dealing in options, and
I.R.C. § 1092(c)(4)(B)(v) —
gain or loss with respect to such option is not ordinary income or loss.
I.R.C. § 1092(c)(4)(C) Deep-In-The-Money Option —
For purposes of subparagraph (B), the term “deep-in-the-money option”
means an option having a strike price lower than the lowest qualified bench mark.
I.R.C. § 1092(c)(4)(D) Lowest Qualified Bench Mark
I.R.C. § 1092(c)(4)(D)(i) In General —
Except as otherwise provided in this subparagraph, for purposes of subparagraph
(C), the term “lowest qualified bench mark” means the highest available
strike price which is less than the applicable stock price.
I.R.C. § 1092(c)(4)(D)(ii) Special Rule Where Option Is For Period More Than 90 Days And Strike Price Exceeds
$50 —
In the case of an option—
I.R.C. § 1092(c)(4)(D)(ii)(I) —
which is granted more than 90 days before the date on which such option expires,
and
I.R.C. § 1092(c)(4)(D)(ii)(II) —
with respect to which the strike price is more than $50,
the lowest qualified bench mark is the second highest available strike price which
is less than the applicable stock price.
I.R.C. § 1092(c)(4)(D)(iii) 85 Percent Rule Where Applicable Stock Price $25 Or Less —
If—
I.R.C. § 1092(c)(4)(D)(iii)(I) —
the applicable stock price is $25 or less, and
I.R.C. § 1092(c)(4)(D)(iii)(II) —
but for this clause,
the lowest qualified bench mark would be less than 85 percent of the applicable stock
price, the lowest qualified bench mark shall be treated as equal to 85 percent of
the applicable stock price.
I.R.C. § 1092(c)(4)(D)(iv) Limitation Where Applicable Stock Price $150 Or Less —
If—
I.R.C. § 1092(c)(4)(D)(iv)(I) —
the applicable stock price is $150 or less, and
I.R.C. § 1092(c)(4)(D)(iv)(II) —
but for this clause,
the lowest qualified bench mark would be less than the applicable stock price reduced
by $10, the lowest qualified bench mark shall be treated as equal to the applicable
stock price reduced by $10.
I.R.C. § 1092(c)(4)(E) Special Year-End Rule —
Subparagraph (A) shall not apply to any straddle for purposes of section 1092(a) if—
I.R.C. § 1092(c)(4)(E)(i) —
the qualified covered call options referred to in such subparagraph are closed or
the stock is disposed of at a loss during any taxable year,
I.R.C. § 1092(c)(4)(E)(ii) —
gain on disposition of the stock to be purchased from the taxpayer under such options
or gains on such options are includible in gross income for a later taxable year,
and
I.R.C. § 1092(c)(4)(E)(iii) —
such stock or option was not held by the taxpayer for 30 days or more after the
closing of such options or the disposition of such stock.
For purposes of the preceding sentence, the rules of
paragraphs (3) and (4) of section 246(c) shall apply in determining the period for which the taxpayer holds the stock.
I.R.C. § 1092(c)(4)(F) Strike Price —
For purposes of this paragraph, the term “strike price"
means the price at which the option is exercisable.
I.R.C. § 1092(c)(4)(G) Applicable Stock Price —
For purposes of subparagraph (D), the term “applicable stock price” means,
with respect to any stock for which an option has been granted—
I.R.C. § 1092(c)(4)(G)(i) —
the closing price of such stock on the most recent day on which such stock was traded
before the date on which such option was granted, or
I.R.C. § 1092(c)(4)(G)(ii) —
the opening price of such stock on the day on which such option was granted, but
only if such price is greater than 110 percent of the price determined under clause
(i).
I.R.C. § 1092(c)(4)(H) Regulations —
The Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this paragraph. Such regulations may include modifications
to the provisions of this paragraph which are appropriate to take account of changes
in the practices of option exchanges or to prevent the use of options for tax avoidance
purposes.
I.R.C. § 1092(d) Definitions And Special Rules —
For purposes of this section—
I.R.C. § 1092(d)(1) Personal Property —
The term “personal property” means any personal property of a type which
is actively traded.
I.R.C. § 1092(d)(2) Position —
The term “position” means an interest (including a futures or forward
contract or option) in personal property.
I.R.C. § 1092(d)(3) Special Rules For Stock —
For purposes of paragraph (1)—
I.R.C. § 1092(d)(3)(A) In General —
In the case of stock, the term “personal property”
includes stock only if—
I.R.C. § 1092(d)(3)(A)(i) —
such stock is of a type which is actively traded and at least 1of the positions
offsetting such stock is a position with respect to such stock or substantially
similar or related property, or
I.R.C. § 1092(d)(3)(A)(ii) —
such stock is of a corporation formed or availed of to take positions in personal
property which offset positions taken by any shareholder.
I.R.C. § 1092(d)(3)(B) Rule For Application —
For purposes of determining whether subsection (e)
applies to any transaction with respect to stock described in subparagraph
(A)(ii), all includible corporations of an affiliated group (within
the meaning of section 1504(a))
shall be treated as 1 taxpayer.
I.R.C. § 1092(d)(4) Positions Held By Related Persons, Etc.
I.R.C. § 1092(d)(4)(A) In General —
In determining whether 2 or more positions are offsetting, the taxpayer shall be
treated as holding any position held by a related person.
I.R.C. § 1092(d)(4)(B) Related Person —
For purposes of subparagraph (A), a person is a related person to the taxpayer if
with respect to any period during which a position is held by such person, such person—
I.R.C. § 1092(d)(4)(B)(i) —
is the spouse of the taxpayer, or
I.R.C. § 1092(d)(4)(B)(ii) —
files a consolidated return (within the meaning of section 1501)
with the taxpayer for any taxable year which includes a portion of such period.
I.R.C. § 1092(d)(4)(C) Certain Flowthrough Entities —
If part or all of the gain or loss with respect to a position held by a partnership,
trust, or other entity would properly be taken into account for purposes of this
chapter by a taxpayer, then, except to the extent otherwise provided in regulations,
such position shall be treated as held by the taxpayer.
I.R.C. § 1092(d)(5) Special Rule For Section 1256 Contracts
I.R.C. § 1092(d)(5)(A) General Rule —
I.R.C. § 1092(d)(5)(B) Special Rule For Identified Straddles —
For purposes of subsection (a)(2) (relating to identified straddles), subparagraph
(A) and section 1256(a)(4) shall not apply to a straddle all of the offsetting positions of which consist of
section 1256 contracts.
I.R.C. § 1092(d)(6) Section 1256 Contract —
I.R.C. § 1092(d)(7) Special Rules For Foreign Currency
I.R.C. § 1092(d)(7)(A) Position To Include Interest In Certain Debt —
For purposes of paragraph (2), an obligor's interest in a nonfunctional currency
denominated debt obligation is treated as a position in the nonfunctional currency.
I.R.C. § 1092(d)(7)(B) Actively Traded Requirement —
For purposes of paragraph (1), foreign currency for which there is an active interbank
market is presumed to be actively traded.
I.R.C. § 1092(d)(8) Special Rules For Physically Settled Positions —
For purposes of subsection (a), if a taxpayer settles a position which is part of
a straddle by delivering property to which the position relates (and such position,
if terminated, would result in a realization of a loss), then such taxpayer shall
be treated as if such taxpayer—
I.R.C. § 1092(d)(8)(A) —
terminated the position for its fair market value immediately before the settlement,
and
I.R.C. § 1092(d)(8)(B) —
sold the property so delivered by the taxpayer at its fair market value.
I.R.C. § 1092(e) Exception For Hedging Transactions —
This section shall not apply in the case of any hedging transaction (as defined
in section 1256(e)).
I.R.C. § 1092(f) Treatment Of Gain Or Loss And Suspension Of Holding Period Where Taxpayer Grantor
Of Qualified Covered Call Option —
If a taxpayer holds any stock and grants a qualified covered call option to purchase
such stock with a strike price less than the applicable stock price—
I.R.C. § 1092(f)(1) Treatment Of Loss —
Any loss with respect to such option shall be treated as long-term capital loss
if, at the time such loss is realized, gain on the sale or exchange of such stock
would be treated as long-term capital gain.
I.R.C. § 1092(f)(2) Suspension Of Holding Period —
The holding period of such stock shall not include any period during which the taxpayer
is the grantor of such option.
I.R.C. § 1092(g) Cross Reference —
For provision requiring capitalization of certain interest and carrying charges
where there is a straddle, see section 263(g).
(Added Pub. L. 97-34, title V, 501(a), Aug. 13, 1981, 95 Stat. 323, and amended Pub. L. 97-448, title I, 105(a)(1)(A)-(C), (2)-(4), Jan. 12, 1983, 96 Stat. 2384, 2385; Pub. L. 98-369, div. A, title I, 101(a)-(d), 102(e)(2), 103(a), 107(a), July 18, 1984, 98 Stat. 616-619, 624, 627, 629; Pub. L. 99-514, title III, 331(a), title XII, 1261(b), title XVIII, 1808(c), 1899A(66), Oct. 22,
1986, 100 Stat. 2220, 2591, 2817, 2962; Pub. L. 100-647, title VI, 6130(c), Nov. 10, 1988, 102 Stat. 3719; Pub. L. 105-34, title XII, Sec. 1271(b)(9), Aug. 5, 1997, 111 Stat 788; Pub. L. 106-170, title V, Sec. 532(c), Dec. 17, 1999, 113 Stat 1860; Pub. L. 106-554, Sec. 401, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 108-357, title VIII, Sec. 888, Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 403(ii), Dec. 21, 2005, 119 Stat. 2577; Pub. L. 110-172, Sec. 7(d), Dec. 29, 2007, 121 Stat. 2473; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(170)-(171), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018--Subsec.
(a)(2)(B). Pub. L. 115-141, Div. U, Sec. 401(a)(170), amended subpar. (B) by substituting ‘‘with
respect to other’’ for ‘‘with respect other’’.
Subsec. (c)(4)(E). Pub. L. 115-141, Div. U, Sec. 401(a)(171), amended subpar. (E)
by striking ‘‘(other than subparagraph (B) thereof)’’.
Prior to amendment, the last sentence of subpar.
(E) read as follows:
“For purposes of the preceding sentence, the rules of paragraphs (3) (other
than subparagraph (B) thereof)
and (4) of section 246(c) shall apply in determining the period for which the taxpayer
holds the stock.”
2007 - Subsec. (a)(2)(A)(i). Pub. L. 110-172, Sec. 7(d)(2)(B)(i), amended clause (i) by substituting “positions” for “identified
positions”.
Subsec. (a)(2)(A)(ii)-(iii). Pub. L. 110-172, Sec. 7(d)(1), amended subpar. (A) by striking “and” at the end of clause
(ii); by redesignating clause (iii) as clause (iv); and by adding a new clause (iii).
Subsec. (a)(2)(A)(ii). Pub. L. 110-172, Sec. 7(d)(2)(B)(ii)-(iii), amended clause (ii) by substituting “position” for “identified
position” and by substituting “offsetting positions”
for “identified offsetting positions”.
Subsec. (a)(2)(B). Pub. L. 110-172, Sec. 7(d)(2)(A), amended subpar. (B) by adding the flush sentence at the end.
Subsec. (a)(2)(C)-(D). Pub. L. 110-172, Sec. 7(d)(3), amended par. (2) by redesignating subpar. (C) as subpar. (D) and by adding a new
subpar. (C).
Subsec. (a)(2)(D). Pub. L. 110-172, Sec. 7(d)(4), amended subpar. (D), as redesignated, by inserting “the rules for the application
of this section to a position which is or has been a liability or obligation, methods
of loss allocation which satisfy the requirements of subparagraph
(A)(iii),” before “and the ordering rules”.
Subsec. (a)(3)(B). Pub. L. 110-172, Sec. 7(d)(2)(C), amended subpar. (B) by substituting “offsetting position”
for “identified offsetting position”.
2005 — Subsec. (a)(2). Pub. L. 109-135, Sec. 403(ii), amended par. (2) by striking the last sentence and by adding subpar.
(C). Before being struck, the sentence read as follows:
“The Secretary shall prescribe regulations which specify the proper methods
for clearly identifying a straddle as an identified straddle (and the positions
comprising such straddle), which specify the rules for the application of this
section for a taxpayer which fails to properly identify the positions of an
identified straddle, and which specify the
ordering rules in cases where a taxpayer disposes of less than an entire position
which is part of an identified straddle.”
2004 - Subsec. (a)(2)(A). Pub. L. 108-357, Sec. 888(a)(1), amended subpar. (A). Before amendment, it read as follows:
“(A) In general
“In the case of any straddle which is an identified straddle as of the close
of any taxable year--
“(i) paragraph (1) shall not apply for such taxable year, and
“(ii) any loss with respect to such straddle shall be treated as sustained not
earlier than the day on which all of the positions making up the straddle are disposed
of.”
Subsec. (a)(2)(B). Pub. L. 108-357, Sec. 888(a)(2), amended subpar. (B) by adding the flush sentence at the end and by amending clause
(ii). Before being amended, clause (ii) read as follows:
“(ii) all of the original positions of which (as identified by the taxpayer)
are acquired on the same day and with respect to which--
“(I) all of such positions are disposed of on the same day during the taxable
year, or
“(II) none of such positions has been disposed of as of the close of the taxable
year, and”.
Subsec. (a)(3)(B)-(C). Pub. L. 108-357, Sec. 888(a)(3), redesignated subpar. (B) as subpar. (C) and added subpar. (B).
Subsec. (c)(2)(B)-(C). Pub. L. 108-357, Sec. 888(a)(4), struck subpar. (B) and redesignated subpar. (C) as subpar. (B). Before being struck,
subpar. (B) read as follows:
“(B) One side larger than other side
“If 1 or more positions offset only a portion of 1 or more other positions,
the Secretary shall by regulations prescribe the method for determining the portion
of such other positions which is to be taken into account for purposes of this section.”
Subsec. (d)(3). Pub. L. 108-357, Sec. 888(c)(1), amended par. (3). Before being amended, it read as follows:
“(3) Special rules for stock
“For purposes of paragraph (1)--
“(A) In general
“Except as provided in subparagraph (B), the term
“personal property” does not include stock. The preceding sentence shall
not apply to any interest in stock.
“(B) Exceptions
“The term “personal property” includes--
“(i) any stock which is part of a straddle at least 1 of the offsetting positions
of which is--
“(I) an option with respect to such stock or substantially identical stock or
securities,
“(II) a securities futures contract (as defined in section 1234B) with respect
to such stock or substantially identical stock or securities, or
“(III) under regulations, a position with respect to substantially similar or
related property (other than stock), and
“(ii) any stock of a corporation formed or availed of to take positions in personal
property which offset positions taken by any shareholder.
“(C) Special rules
“(i) For purposes of subparagraph (B), subsection
(c) and paragraph (4) shall be applied as if stock described in clause
(i) or (ii) of subparagraph (B) were personal property.
“(ii) For purposes of determining whether subsection
(e) applies to any transaction with respect to stock described in clause (ii) of subparagraph
(B), all includible corporations of an affiliated group (within the meaning of section
1504(a)) shall be treated as 1 taxpayer.”
Subsec. (d)(8). Pub. L. 108-357, Sec. 888(b), added par. (8).
2000--Subsec. (d)(30(B)(i). Pub. L. 106-554, Sec. 401(e), amended claue (i) by striking “or” at the end of subclause (I), by
redesignating subclause (II) as subclause (III), and by adding new subclause (II).
1999--Subsec. (a)(3)(B)(ii)(II). Pub. L. 106-170, Sec. 532(c)(1)(F) substituted
“section 1221(a)” for “section 1221”.
1997--Subsec. (f)(2). Pub. L. 105-34, Sec. 1272(b)(9) substituted
“The” for “Except for purposes of section 851(b)(3), the”.
1988--Subsec. (b)(2)(D). Pub. L. 100-647 added subpar. (D).
1986--Subsec. (c)(4)(E). Pub. L. 99-514, 331(a), in cl. (i), inserted
“or the stock is disposed of at a loss”, in cl. (ii), substituted
“or gains on such options are” for “is”, and in cl. (iii),
inserted
“or option” and “or the disposition of such stock”.
Subsec. (d)(3)(A). Pub. L. 99-514, 1808(c), inserted at end “The preceding sentence shall not apply to any interest
in stock.”
Subsec. (d)(5), (6). Pub. L. 99-514, 1899A(66), amended directory language of section 101(b)(2) of Pub. L. 98-369 to clarify general amendment by sections 101(d) and 102(e) of Pub. L. 98-369. See 1984 Amendment notes below.
Subsec. (d)(7). Pub. L. 99-514, 1261(b), added par. (7).
1984--Subsec. (a)(2)(B)(i). Pub. L. 98-369, 107(a), designated existing provisions as subcl. (I) and added subcl. (II).
Subsec. (b). Pub. L. 98-369, 103(a), amended subsec. (b) generally, substituting provisions dealing with regulations
for provisions dealing with character of gain or loss and wash sales.
Subsec. (c)(4). Pub. L. 98-369, 101(a)(2), added par. (4).
Subsec. (d)(1). Pub. L. 98-369, 101(b)(1), struck out “(other than stock)” before
“of a type”.
Subsec. (d)(2). Pub. L. 98-369, 101(a)(1), redesignated former subpar. (A) as entire par. (2), and struck out former
subpar. (B) which provided that “position"
includes any stock option which is a part of a straddle and which is an option to
buy or sell stock which is actively traded, but does not include a stock option which
(i) is traded on a domestic exchange or on a similar foreign exchange designated by
the Secretary, and
(ii) is of a type with respect to which the maximum period during which such option
may be exercised is less than the minimum period for which a capital asset must be
held for gain to be treated as long-term capital gain under section 1222(3).
Subsec. (d)(3), (4). Pub. L. 98-369, 101(b)(2), as amended by Pub. L. 99-514, 1899A(66), added par. (3) and redesignated former pars. (3) and (4) as (4) and (5),
respectively.
Subsec. (d)(5). Pub. L. 98-369, 101(d), amended par. (4) generally, substituting provisions relating to special
rules for section 1256 contracts for provisions relating to special rules for regulated
futures contracts.
Pub. L. 98-369, 101(b)(2), as amended by Pub. L. 99-514, 1899A(66), redesignated former par. (4) as (5). Former par. (5) redesignated
(6).
Subsec. (d)(6). Pub. L. 98-369, 102(e)(2), amended par. (5) generally, substituting references to section 1256 contracts
for references to regulated futures contracts wherever appearing in heading and text.
Pub. L. 98-369, 101(b)(2), as amended by Pub. L. 99-514, 1899A(66), redesignated former par. (5) as (6).
Subsecs. (f), (g). Pub. L. 98-369, 101(c), added subsec. (f) and redesignated former subsec. (f) as (g).
1983--Subsec. (a)(1)(A). Pub. L. 97-448, 105(a)(1)(A), (2), substituted
“unrecognized gain” for “unrealized gain” and “which
were offsetting positions with respect to 1 or more positions from which the loss
arose” for “which-- (i) were acquired by the taxpayer before the disposition
giving rise to such loss, (ii) were offsetting positions with respect to the 1 or
more positions from which the loss arose, and (iii) were not part of an identified
straddle as of the close of the taxable year”.
Subsec. (a)(3). Pub. L. 97-448, 105(a)(1)(B), substituted “Unrecognized gain” for
“Unrealized gain” in heading.
Subsec. (a)(3)(A). Pub. L. 97-448, 105(a)(1)(B), substituted “unrecognized gain"
for “unrealized gain” as term defined, designated existing definition
as cl. (i), and added cl. (ii).
Subsec. (a)(3)(B)(i)(I). Pub. L. 97-448, 105(a)(1)(C), substituted “with respect to which, as of the close of the taxable
year, there is unrecognized gain, and"
for “which is held by such taxpayer as of the close of the taxable year and
with respect to which there is unrealized gain, and”.
Subsec. (a)(3)(B)(i)(II). Pub. L. 97-448, 105(a)(1)(C), substituted “unrecognized gain"
for “unrealized gain”.
Subsec. (c)(2)(C). Pub. L. 97-448, 105(a)(4), substituted “subsection (a)(2)(B)"
for “subsection (a)(3)(B)”.
Subsec. (d)(4). Pub. L. 97-448, 105(a)(3), substituted “a straddle at least 1 (but not all) of the positions
of which are regulated futures contracts, the provisions of this section shall apply”
for “a straddle-- (A)
at lease 1 (but not all) of the positions of which are regulated futures contracts,
and (B) with respect to which the taxpayer has elected not to have the provisions
of section 1256 apply, the provisions of this section shall apply”.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(170)-(171), effective March 23, 2018.
EFFECTIVE DATE OF 2007 AMENDMENTS
Amendments by Section 7(d) of Pub. L. 110-172 shall apply as if included in the provisions of the American Jobs Creation Act of
2004 [Pub. L. 108-357, Sec. 888] to which they relate, except that the amendment made by Sec. 7(d)(2)(A) is effective
for straddles acquired after the date of the enactment of this Act [Enacted: Dec.
29, 2007].
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendments by Section 403(ii) of Pub. L. 109-135 effective as if included in the provisions of the American Jobs Creation Act of 2004
[Pub. L. 108-357, Sec. 888]
to which they relate.
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Section 888 of Pub. L. 108-357 effective for positions established on or after the date of the enactment of this
Act [Enacted:
Oct. 22, 2004].
EFFECTIVE DATE OF 2000 AMENDMENTS
Amendment by Section 401(e) of Pub. L. 106-554 effective on the date of the enactment of this Act [Enactment Date: Dec. 21, 2000].
EFFECTIVE DATE OF 1999 AMENDMENTS
Amendment by Section 532(c)(1)(F) of Pub. L. 106-170 effective for any instrument held, acquired, or entered into, any transaction entered
into, and supplies held or acquired on or after enactment date of this Act [Enacted:
Dec. 17, 1999].
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by Section 1271(b)(9) of Pub. L. 105-34 effective for taxable years beginning after the date of enactment of such Act [enacted:
Aug. 5, 1997].
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by Pub. L. 100-647 applicable with respect to forward contracts, future contracts, options, and similar
instruments entered into or acquired after Oct. 21, 1988, see section 6130(d)(1) of
Pub. L. 100-647, set out as a note under section 988 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Section 331(b) of Pub. L. 99-514 provided that: “The amendments made by this section
[amending this section] shall apply to positions established on or after January 1,
1987.”
Amendment by section 1261(b) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions
and qualifications, see section 1261(e) of Pub. L. 99-514, set out as an Effective Date note under section 985 of this title.
Amendment by section 1808(c) of Pub. L. 99-514 effective, except as otherwise provided, as if included in the provisions of the
Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Section 101(e) of Pub. L. 98-369 provided that:
“(1) In general.--Except as otherwise provided in this subsection, the amendments
made by this section [amending this section] shall apply to positions established
after December 31, 1983, in taxable years ending after such date.
“(2) Special rule for offsetting position stock.--In the case of any stock of
a corporation formed or availed of to take positions in personal property which offset
positions taken by any shareholder, the amendments made by this section shall apply
to positions established on or after May 23, 1983, in taxable years ending on or after
such date.
“(3) Subsection (c).--The amendment made by subsection
(c) [amending this section] shall apply to positions established after June 30, 1984,
in taxable years ending after such date.
“(4) Subsection (d).--The amendment made by subsection
(d) [amending this section] shall apply to positions established after the date of
the enactment of this Act in taxable years ending after such date.”
Amendment by section 102(e)(2) of Pub. L. 98-369 applicable to positions established after July 18, 1984, in taxable years ending
after that date, except as otherwise provided, see section 102(f), (g) of Pub. L. 98-369, set out as a note under section 1256 of this title.
Section 103(b), (c) of Pub. L. 98-369, as amended by Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(b) Requirement That Regulations Be Issued Within 6 Months After the Date of
Enactment.--The Secretary of the Treasury or his delegate shall prescribe initial
regulations under section 1092(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(including regulations relating to mixed straddles) not later than the date 6 months
after the date of the enactment of this Act [July 18, 1984].
“(c) Effective Date of Regulations With Respect to Mixed Straddles.--The regulations
described in subsection (b) with respect to the application of section 1233 of the Internal Revenue Code of 1986 to mixed straddles shall not apply to mixed straddles all of the positions
of which were established before January 1, 1984.”
Section 107(e) of Pub. L. 98-369 provided that: “The amendments made by this section
[amending sections 1092, 1236, and 1256 of this title] shall apply to positions entered
into after the date of the enactment of this Act [July 18, 1984], in taxable years
ending after such date.”
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by Pub. L. 97-448 effective, except as otherwise provided, as if it had been included in the provision
of the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 109 of Pub. L. 97-448, set out as a note under section 1 of this title.
EFFECTIVE DATE
Section 508 of title V of Pub. L. 97-34, as amended by Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(a) In General.--Except as otherwise provided in this section, the amendments
made by this title [enacting sections 1092, 1234A, and 1256 of this title, amending
sections 263, 341, 1212, 1221, 1231, 1232, 1233, 1236, and 6653 of this title, and
enacting provisions set out as a note under section 1256 of this title] shall apply
to property acquired and positions established by the taxpayer after June 23, 1981,
in taxable years ending after such date.
“(b) Identification Requirements.--
“(1) Under section 1236 of code.--The amendments made by section 506 [amending
section 1236 of this title]
shall apply to property acquired by the taxpayer after the date of the enactment of
this Act [Aug. 13, 1981] in taxable years ending after such date.
“(2) Under section 1256(e)(2)(c)
of code.--Section 1256(e)(2)(C)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this title) shall apply to property acquired and positions established
by the taxpayer after December 31, 1981, in taxable years ending after such date.
“(c) Election With Respect to Property Held on June 23, 1981.--If the taxpayer
so elects (at such time and in such manner as the Secretary of the Treasury or his
delegate shall prescribe)
with respect to all regulated futures contracts or positions held by the taxpayer
on June 23, 1981, the amendments made by this title shall apply to all such contracts
and positions, effective for periods after such date in taxable years ending after
such date. For purposes of the preceding sentence, the term ‘regulated futures
contract’ has the meaning given to such term by section 1256(b) of the Internal Revenue Code of 1986, and the term
‘position’ has the meaning given to such term by section 1092(d)(2)
of such Code.”
TREATMENT OF CERTAIN LOSSES ON STRADDLES ENTERED INTO BEFORE EFFECTIVE DATE OF ECONOMIC
RECOVERY TAX ACT OF 1981
Section 108 of Pub. L. 98-369, as amended by Pub. L. 99-514, 2, title XVIII, 1808(d), Oct. 22, 1986, 100 Stat. 2095, 2817, provided that:
“(a) General Rule.--For purposes of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], in the case of any disposition of 1 or more positions--
“(1) which were entered into before 1982 and form part of a straddle, and
“(2) to which the amendments made by title V of the Economic Recovery Tax Act
of 1981 [Pub. L. 97-34, see Effective Date note above]
do not apply, any loss from such disposition shall be allowed for the taxable year
of the disposition if such loss is incurred in a trade or business, or if such loss
is incurred in a transaction entered into for profit though not connected with a trade
or business.
“(b) Loss Incurred in a Trade or Business.--For purposes of subsection (a),
any loss incurred by a commodities dealer in the trading of commodities shall be treated
as a loss incurred in a trade or business.
“(c) Net Loss Allowed.--If any loss with respect to a position described in
paragraphs (1) and (2) of subsection (a)
is not allowable as a deduction (after applying subsections (a) and
(b)), such loss shall be allowed in determining the gain or loss from dispositions
of other positions in the straddle to the extent required to accurately reflect the
taxpayer's net gain or loss from all positions in such straddle.
“(d) Other Rules.--Except as otherwise provided in subsections (a) and (c) and
in sections 1233 and 1234 of such Code, the determination of whether there is recognized
gain or loss with respect to a position, and the amount and timing of such gain or
loss, and the treatment of such gain or loss as long-term or short-term shall be made
without regard to whether such position constitutes part of a straddle.
“(e) Straddle.--For purposes of this section, the term ‘straddle’
has the meaning given to such term by section 1092(c) of the Internal Revenue Code of 1986 as in effect on the day after the date of the enactment of the Economic Recovery
Tax Act of 1981 [Aug. 13, 1981], and shall include a straddle all the positions of
which are regulated futures contracts.
“(f) Commodities Dealer.--For purposes of this section, the term ‘commodities
dealer’ means any taxpayer who--
“(1) at any time before January 1, 1982, was an individual described in section 1402(i)(2)(B) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this subtitle), or
“(2) was a member of the family
(within the meaning of section 704(e)(3) of such Code) of an individual described
in paragraph (1) to the extent such member engaged in commodities trading through
an organization the members of which consisted solely of--
“(A) 1 or more individuals described in paragraph (1), and
“(B) 1 or more members of the families (as so defined) of such individuals.
“(g) Regulated Futures Contracts.--For purposes of this section, the term ‘regulated
futures contracts’ has the meaning given to such term by section 1256(b)
of the Internal Revenue Codeof 1986 (as in effect before the date of enactment of this Act [July 18, 1984]).
“(h) Syndicates.--For purposes of this section, any loss incurred by a person
(other than a commodities dealer) with respect to an interest in a syndicate (within
the meaning of section 1256(e)(3)(B) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) shall not be considered to be a loss incurred in a trade or business.”
