외환 시장 현황

FX 상태.
다음 정보는 다음 언어에서도 찾을 수 있습니다.
2017 년 11 월 22 일
마진 요구 사항은 2017 년 11 월 24 일 금요일 시장 마감 후 조정될 것입니다. 마진은 가격 변동을 고려하여 매월 마지막 금요일에 업데이트됩니다. FXCM은 한 달에 한 번 이상의 업데이트를 예상하지 않지만 극심한 시장 변동이나 이벤트 위험으로 인해 예정되지 않은 월간 업데이트가 필요할 수 있습니다.
마진 요구 사항은 시장 변동성 및 환율 변동에 따라 주기적으로 변경 될 수 있습니다. 예를 들어 특정 통화 쌍에 대한 마진 요구 (MMR)는 해당 쌍의 명목 가치에 대한 백분율로 계산됩니다. 특정 통화 쌍의 환율이 변동하기 때문에 그 쌍에 대한 마진 요구 사항을 조정해야합니다. 예를 들어, 유로화가 달러 대비 강세를 보이면 EUR / USD 포지션을 미화로 표시하는 데 더 많은 마진이 필요할 것입니다.
FXCM은 한 달에 한 번 이상의 업데이트를 예상하지 않지만 극심한 시장 변동이나 이벤트 위험으로 인해 예정되지 않은 월간 업데이트가 필요할 수 있습니다. 최신 마진 요구 사항 (per1K lot)은 Trading Station의 Simplified Dealing Rates 창에 표시됩니다.
귀하의 계좌 엔티티 및 레버리지 프로필에 따라 아래의 해당 마진 변경 사항을 검토하십시오.
다음을 통해 계정을 보유하고 계시다면 여기를 참조하십시오 :
참고 사항 : 시장 상황이 매우 휘발성이되는 경우 마진 요구 사항을 추가로 높일 수 있습니다. 또한 마진 요구 사항은 가격 변동에 따라 예고없이 변경 될 수 있으며 $ 1 단위로 조정될 수 있습니다.
사용 가능한 마진을 가깝게 모니터링하고 제로를 넘지 않도록하십시오. 사용 가능한 마진은 계정 자본 (사용 가능한 마진 + 사용 마진)의 80 % 이상을 권장합니다. 사용 가능한 마진을 높이려면 다음 중 하나를 수행하십시오.
형평성을 높이기 위해 자금을 예치하십시오. 개방 된 직책을 닫거나 더 작은 로트 크기를 거래하십시오.
외환 거래 및 CFD 거래로 인해 예금을 초과 할 수있는 손실이 발생할 수 있으므로 모든 사람에게 적합하지 않을 수 있으므로 관련된 위험을 완전히 이해했는지 확인하십시오.
귀하의 계정과 관련된 마진 일정이 확실하지 않거나 궁금한 점이 있으시면 24 시간 이용 가능한 FXCM 전문가에게 라이브 채팅 또는 +44 (0) 20 7398 4050으로 전화하거나 infofxcm. co. uk에서 이메일로 보내주십시오.
무역 관련 질문? 온라인으로 무역 감사를 제출하십시오.
FXCM은 귀하가 당사의 기술적 인 문제로 부정적인 영향을 받았다고 생각하시는 경우 질문을 기꺼이 검토해드립니다. 거래 내역을 검토하려면 티켓 번호, 시간, 가격 및 분쟁 금액과 같은 거래 내역을 준비하십시오. 예상치 못한 마감이나 유동성 문제로 인해 예고없이 변경 될 수 있습니다.
마진에 대한 외환 / CFD 거래는 높은 위험도를 지니 며 예금을 초과하여 손실을 견딜 수 있기 때문에 모든 투자자에게 적합하지 않을 수 있습니다. 레버리지가 당신에게 불리하게 작용할 수 있습니다. 현지 법률 및 규정에 의해 부과 된 특정 제한 사항으로 인해 독일 거주 고객은 기탁 된 자금을 완전히 상실 할 수는 있지만 기탁 된 기금을 초과하는 후속 지급 의무가 적용되지 않습니다. 시장과 거래와 관련된 모든 위험을 알고 충분히 이해하십시오. FXCM 그룹 (집합 적으로 "FXCM 그룹") 내의 모든 EU 지점, FXCM Australia Pty. Limited, 전술 한 회사의 계열사 또는 다른 회사를 포함한 Forex Capital Markets Limited가 제공하는 제품을 거래하기 전에 신중하게 고려해야합니다 재정 상황 및 경험 수준. FXCM Australia Pty. Limited ( "FXCM AU") (AFSL 309763)가 제공하는 제품을 교환하기로 결정한 경우, 금융 서비스 안내서, 제품 공개 성명서 및 이용 약관을 읽고 이해해야합니다. FXCM 그룹은 투자 조언으로 의도되지 않은 일반적인 논평을 제공 할 수 있으며 그러한 것으로 해석되어서는 안됩니다. 별도 재무 고문의 조언을 구하십시오. FXCM Group은 오류, 부정확 또는 누락에 대해 어떠한 책임도지지 않습니다. 본 자료에 포함 된 정보, 텍스트, 그래픽, 링크 또는 기타 항목의 정확성, 완전성을 보증하지 않습니다. 추가 조치를 취하기 전에 FXCM 그룹 웹 사이트의 이용 약관을 읽고 이해하십시오.
FXCM Group은 미국 뉴욕 주 뉴욕, 뉴욕 50 층의 55 Water Street, 50th Floor에 본사를두고 있습니다. Forex Capital Markets Limited ( "FXCM LTD")는 금융 행위 감독 기관 (Financial Conduct Authority)에 의해 영국에서인가되고 규제됩니다. 등록 번호 217689. 영국 및 웨일즈에 Companies House 회사 번호 04072877로 등록. FXCM Australia Limited ( "FXCM AU")는 호주 증권 및 투자위원회 (AFSL 309763)에서 규제합니다. FXCM AU ACN : 121934432. FXCM Markets Limited & # 8220; FXCM Markets & # 8221;)는 FXCM 그룹 내의 운영 자회사입니다. FXCM 시장은 규제되지 않으며 금융 행위 감독 기관 (Financial Conduct Authority) 및 호주 증권 투자위원회 (Securities and Investment Commission)를 포함하되 이에 국한되지 않는 다른 FXCM 그룹 주체를 관장하는 규제 감독의 대상이 아닙니다. FXCM Global Services, LLC는 FXCM 그룹 내의 운영 자회사입니다. FXCM Global Services, LLC는 규제를받지 않으며 규제 감독의 대상이 아닙니다.

외환 시장 시간.
아래 Forex Market Time Converter를 사용하여 현지 시간대의 주요 시장 개장 시간을 확인하십시오.
Forex 시간대 변환기에 관하여.
외환 ( "외환"또는 "외환") 통화 시장은 주식 및 상품과 같이 규제 된 거래소에서 거래되지 않습니다. 오히려 시장은 금융 기관과 소매 거래 브로커의 네트워크로 구성되어 있으며 각각은 자체 영업 시간을 갖고 있습니다. 대부분의 참가자는 오전 8 시부 터 오후 4 시까 지 영업합니다. 지역 시간대에서이 시간은 각각 시장 개방 및 마감 시간으로 사용됩니다.
시간 및 날짜 : 12:38 AM GMT - 12 월 18 ~ 2017
일광 절약 시간 (DST) 전환 날짜 및 시간에 대한 표준 시간대를 클릭하십시오.
Forex Market Hours Converter는 각 외환 시장에서 오전 8 시부 터 오후 4 시까 지의 현지 월 클럭 거래 시간을 가정합니다. 휴일은 포함되어 있지 않습니다. 정확한 시간 소스로 사용하지 마십시오. 정확한 시간이 필요하면 time. gov를 참조하십시오. 질문, 의견 또는 제안을 webmastertimezoneconverter에 보내주십시오.
Forex 시장 시간 변환기를 사용하는 방법.
외환 시장은 일주일에 5 일 반나절 하루 24 시간 거래가 가능합니다. Forex Market Time Converter는 각 글로벌 마켓 센터의 현재 상태를 나타내는 Status 열에 "Open"또는 "Closed"를 표시합니다. 그러나 주간이나 야간 언제든지 시장을 거래 할 수 있다고해서 꼭 꼭해야한다는 것은 아닙니다. 대부분의 성공적인 데이 트레이더는 시장 활동이 높고 거래가 가벼운시기를 피하는 것이 가장 좋은 경우에 실시 될 경우 더 많은 거래가 성공적이라는 것을 이해합니다.
다음은 Forex Market Time Converter 사용에 대한 몇 가지 팁입니다.
London, New_York 및 Tokyo의 세 가지 최대 마켓 센터의 거래 시간 동안 거래 활동을 집중하십시오. 이 세 가지 시장 중 하나가 열릴 때 대부분의 시장 활동이 일어날 것입니다. 가장 활발한 시장 시간 중 일부는 두 개 이상의 마켓 센터가 동시에 열릴 때 발생합니다. Forex Market Time Converter는 Status 열에 여러 개의 녹색 "Open"표시를 표시하여 두 개 이상의 시장이 언제 열려 있는지를 명확하게 나타냅니다.

외환 시장 상황
선물, 혜택 플랜.
2010 년 10 월 18 일부터 미국 상품 선물 거래위원회 (CFTC)는 도드 - 프랭크 월 스트리트 개혁 및 소비자 보호법의 최종 규정을 이행 할 것입니다. 848 페이지 PDF (FINReg, 2010) 미국 시민의 경우, 이는 해외 소매 외환 계정에 대한 액세스를 사실상 금지합니다.
FXCM, FXDD, Alpari와 같은 미국 FCM에서 거래하는 미국 시민권 자와 Gain UK, FXCM UK FXDD Malta 등의 오프 쇼어 주체에 관한 정보. 귀하의 계좌가 거래되는 경우 2010 년 10 월 18 일에 이 브로커 중 어느 곳에서든 폐쇄되며 새 양식을 작성해야합니다. 귀하는 외상 브로커가있는 미국 내 지점에서 Forex를 거래하도록 중개인이해야합니다. 새로운 미국 규칙의 주요 내용 :
미국 거주자에게만 2010 년 10 월 18 일 적용되는 새로운 규정.
GBP / JPY, USD / JPY 및 USD / CHF와 같은 대부분의 FX 쌍에 대한 50 : 1 마진 GBP / JPY 등 다른 모든 쌍을 포함한 대부분의 FX 외환에 대한 20 : 1 마진 (이 마진 수준 CFTC에 의해 언제든지 축소 될 수 있음) 포지션 헤딩은 허용되지 않습니다. 현재 귀하가 오프 쇼어 주체에있는 경우 첫 번째 아웃을 헤지 할 수 있습니다. (FIFO) 쌍으로 여러 포지션을 가지고있는 경우 오픈 된 순서대로 포지션을 닫아야합니다. 금은 없음 및 외화 은행 없음 또는 Off - Shore FX Brokers 대부분의 소매 장외 거래는 법 "742 (c) 항에 따라 금지되어 있습니다. 사람. 적법한 계약 참가자가 아닌 자, 계약, 계약 또는 계약, 계약 또는 거래를 허용하는 연방 규제 기관의 규칙 또는 규정에 의거 한 경우를 제외하고 외화 거래 연방 규제 기관이 규정하는 조건에 따라 & quot;
2010 년 10 월 18 일까지 미국 거주자에게 적용되는 규칙.
100 : 1 모든 쌍의 마징. 즉, 거래하는 모든 표준 제비에 대해 핍당 $ 10.00을 받게됩니다. 여러분 중 일부는 200 : 1의 마진을 가지고 거래하며, 이기는 거래가있을 때 더 높은 보수를줍니다. 헤징. 해안 사업체에서 거래를하는 경우에는 먼저 FIRST IN FIRST IN에서 포지션을 헤징 할 수 있습니다. 당신이 해안 떨어져 무역하는 경우에 당신은 어떤 순서든지에있는 당신의 위치의 무엇이든을 닫을지도 모른다.
변화의 실용적 효과.
2010 년 10 월 18 일에 한 쌍에 따라 거래되는 모든 핍에 대해 $ 2.00에서 $ 5.00까지 받게됩니다. 오늘 행한 거래와 동일한 거래를하기 위해서는 최대 5 배의 금액이 필요합니다. FIRST IN FIRST OUT 앞으로 나아갈 헤게 전략을 사용할 수 없습니다. 더 이상 거래를 종료 할 수있는 순서를 선택할 수 없게됩니다.
다음은 2011 년 7 월 15 일까지 미국 거주자에게 적용되는 대부분의 내용입니다.
OTC 외환의 제거 : Dodd-Frank Act는 설립 초기부터 Dodd-Frank Act 742 (C) 항에 따라 대부분의 소매 장외 거래를 금지합니다. OTC 금속의 제거 : 금 또는은과 같은 OTC 귀금속의 경우, 법 제 742 (a) 조는 어느 기업이든 다시 포함하는 사람이 어떤 상품에 거래를하거나 진입을 제안하는 것을 금지한다. 자격을 갖춘 계약 참가자 또는 적격 상업 주체가 아닌 사람. 소규모 수영장 면제 (브로커 소개) 삭제 : 법 403 조항에 따라 "사설 고문" 면제, 즉 1940 년 투자 자문법 ( "자문위원 법")의 203 조 (b) (3) 항은 법 시행일로부터 1 년 이내에 (2011 년 7 월 21 일) 폐지 될 것입니다. 재정적 자격 변경 :이 법 제 413 (a) 조는 공인 투자자로 간주 될 자격이있는 자격 자와 적격 자격자 ( "QEP")로 재정 조건을 변경합니다. 수정 된 공인 투자자 표준은 신규 투자자에게만 적용되며 기존 투자자는 포함하지 않는다는 점에 유의해야합니다. 그러나 기존 투자자의 추가 구독은 일반적으로 지속적인 투자자 자격 확인을 요구하는 것으로 간주됩니다. 계정 폐쇄 : 대부분의 금융 기관은 미국 고객에게 Dodd-Frank 법의 의미를 알 렸습니다. 그러나 계좌가있는 경우 Dodd-Frank 법에 관해서는 외환 중개인에게 문의하고 자금을 인출 할 준비를하십시오. 미국을 제외한 비 미국 거주자 상인은 반드시 도드 - 프랭크 법에 의해 영향을받지는 않습니다. 조지 소로스 (George Soros)는 2011 년 7 월 현재 자신의 펀드가 외부 투자자들에게 공개되지 않았다고 발표했으며 고객 펀드에 $ 1B를 돌려 주었다. 외관상으로는 가족 예산의 나머지 24.5B는 가장 적절하다고 간주되어 사용됩니다.
이 웹 페이지에있는 정보에 대한 링크 :
현물 시장 (기본 과세는 일반적으로 통상 이익 및 손실에 대한 IRC §988에 의거합니다). 전진과 선물 : 기본 과세는 IRC §988의 통상적 인 이득 & amp; 사상자 수. 항목이 일반적으로 12 월 31 일에 M2M이 아니라면 "60/40"에 대해 IRC §1256에 따라 세금이 부과됩니다. 자본 이득 & amp; 사상자 수. 옵션 : 기본 과세는 IRC §988에서 일반 이익 & amp; 사상자 수. 항목이 일반적으로 12 월 31 일에 M2M이 아니라면 "60/40"에 대해 IRC §1256에 따라 세금이 부과됩니다. 자본 이득 & amp; 사상자 수.
위의 기본값은 다음 중에서 선택할 수 있습니다.
IRC §988 항목은 "60/40"에 대해 IRC §1256에 따라 과세 될 수 있습니다. 자본 이득 & amp; 적절한 선거가있을 경우 손실. §988 (c) (1) (E) (ⅲ)에 의거하여 정의 된 특정 헤지 펀드에 대해서는 특별 §1256 "0 / 100" 자본 이득 & amp; 사상자 수. IRC §1256 항목은 적절한 선거가 이루어진 경우 IRC §988에 따라 과세 할 수 있습니다.
일반적으로 IRC §988 항목에 대해 IRC §1256에 따라 과세하는 경우 I RC §988 (a) (1) (B) 및 Treas에 따라 해당 거래가 체결되기 전에 선거가 이루어집니다. Reg. §1.988-3 (b) (4). 이는 Treas에 설명 된 것과 같이 격리 된 별도의 중개 계좌로 거래가 실행될 때 완료된 것으로 확인 될 수 있습니다. Regs 1.988-3 (b) (5) (ii) (D).
이익 또는 손실의 특성 (기본적으로) :
사업 또는 투자 유형 활동에 종사하는 개인의 통화 손익은 일반적인 손익입니다. §988 (a) (1) (A) 및 §988 (e) 참조.
개인 활동에 종사하는 개인의 통화 손실은 지불 할 수없는 개인 지출입니다. §165 및 §262 참조.
§ 1.165-1 (e) 개인의 손실에 대한 제한. 개인의 경우 165 (a) 항에 의해 부여 된 손실에 대한 공제는 본 조항의 165 (c) 항 및 단락 (a)의 조항에 따라 다음과 같이 제한됩니다.
무역이나 사업에서 발생하는 손실;
이익을 위해 입력 된 거래에서 발생한 손실 [예 : 투자] 무역이나 사업과 관련이 없지만; 과.
폭탄, 폭풍, 난파 또는 기타 사상자로 인해 손실이 발생하고 도난으로 인해 손실이 발생하지 않은 경우 무역이나 사업과 관련이 없으며 이익을 위해 체결 된 거래에서 발생하지 않는 재산 손실 재산세 신고서에 재산세를 내야합니다. 사상자 및 도난 피해에 대한 추가 조항은 각각 §1.165-7 및 1.165-8을 참조하십시오.
보고 (IRS 양식 1040을 제출하는 개별 납세자 별) :
일부 납세자는 양식 4797, 파트 II를 사용합니다. 일부 납세자는 양식 4740 대신 양식 1040, 라인 21을 사용합니다. 이자 소득 또는이자 비용이보고되어야하는 기타 적절한 장소. 50,000 달러를 초과하는 단일 직위의 순 손실은 일반적으로 IRS 서식 8886에도보고해야합니다.
자본 이득 및 손실은 Schedule D (그리고 적절한 경우 IRS 양식 6781)에보고됩니다. IRC §988 선거가 이루어진 경우 납세자는 확인 진술서를 첨부해야합니다.
PAMM (백분율 할당 관리 모듈 또는 때때로 백분율 할당 자금 관리)
LAMM (로트 배정 관리 모듈)
MAM (다중 계정 관리)
외화로 표시된 거래의 환산 손익은 예약일 (자산 또는 부채를 미국 세금 목적 상 고려한 날짜)과 지불 일 또는 환율의 변동으로 인해 발생합니다. 받았습니다. 345 일부 예외를 제외하고는, 교환 손익은 경상 손익으로 처리한다. 346.
외화 매매를위한 선도 계약은 부동산의 이익을 구성합니다. 따라서 통화 선물 계약을 체결하면 일반적인 세금 원칙에 따라 자본 이득 또는 손실이 발생합니다. 1986 년 제정 된 포괄적 세법에 따라 계약이나 옵션이 자본 자산이고 스 트래들 트랜잭션의 일부가 아니며 식별 된 경우 외화로의 선도 계약, 미래 계약 또는 옵션에 대해 자본 이득 또는 손실 처리를 계속 사용할 수 있습니다 거래가 체결 된 날이 끝나기 전에 348.
내부 수익 코드 초. 988. 특정 외화 거래의 처리.
988 (a) 일반 규칙.
이 장의 다른 조항에도 불구하고 -
988 (a) (1) 통상적 인 소득 또는 손실의 처우.
988 (a) (1) (A) 일반적으로.
이 조항에서 달리 규정하지 않는 한, 제 988 조 거래에 귀속되는 외화 차 손익은 별도로 계산되어 경상 이익 또는 손실로 처리됩니다 (경우에 따라).
988 (a) (1) (B) 선수금 등의 특별 규정
규정에 제공된 경우를 제외하고 납세자는 자본 자산 인 (c) (1) (B) (iii) 항에 설명 된 선도 계약, 선물 계약 또는 옵션에 기인 한 외화 차 손익을 처리하도록 선택할 수 있습니다 납세자의 손에 자본 이득 또는 손실 (경우에 따라)으로 (법령 제 항 (4) 항에 관계없이) 제 1092 (c) 항의 의미 내에서) 그러한 선거를하고 그러한 거래가 체결되기 전 (또는 장관이 정할 수있는 조기에) 그러한 거래를 확인해야한다.
988 (a) (2) 이익 또는 손실을 특정 목적으로이자로 취급.
조례에 규정 된 범위 내에서, (1) 항에 따른 경상 이익 또는 손실로 간주되는 금액은이자 수익 또는 경우에 따라 비용으로 처리해야한다.
988 (a) (3) (A) 일반적으로.
규정에 달리 규정 된 경우를 제외하고, (1) 항 (B)에 관계없이) (1)에 따른 경상 소득 또는 손실로 간주되는 금액의 경우, 그러한 금액의 출처는 거주지를 참조하여 결정되어야한다 또는 납세자의 자격을 갖춘 사업 단위에 대하여 자산, 부채 또는 수입이나 지출 항목이 적절히 반영되도록해야합니다.
이 subpart의 목적을 위해 -
988 (a) (3) (B) (i) 일반적으로.
어떤 사람의 거주지는 -
개인의 경우, 해당 개인의 세무서 (제 911 조 (d) (3) 항에 정의 된 바와 같이)가 소재한 국가는,
미국인 인 법인, 파트너십, 신탁 또는 부동산 (제 7701 (a) (30) 항에 정의 된 바에 따라)의 경우에는 988 (a) (3) (B) (i) 미국 및.
988 (a) (3) (B) (i) (III) 미국 이외의 다른 법인, 파트너십, 신탁 또는 부동산의 경우.
개인이 세금 가정을 가지고 있지 않은 경우 (그렇게 정의 된 바와 같이), 해당 개인이 미국 시민권 자이거나 거주자 외국인 인 경우 해당 개인의 주거지는 미국이어야하며 그러한 개인이 미국이 아닌 경우에는 미국 시민권 자 또는 거주자 외국인이 아닙니다.
납세자의 자격있는 사업 단위 (개인 포함)의 경우 해당 단위의 거주지는 해당 자격을 갖춘 사업 단위의 주요 사업장이 위치한 국가가됩니다.
988 (a) (3) (B) (iii) 파트너십을위한 특별 규칙.
규정에 명시된 범위 내에서, 파트너쉽의 경우, 거주 결정은 파트너 레벨에서 이루어져야합니다.
988 (a) (3) (다) 특정 관련 당사자 융자에 대한 특별 규정.
규정에 규정 된 범위를 제외하고, 미국인 또는 관련 인이 10 퍼센트의 지분을 소유 한 외국 법인에 대하여 달러가 아닌 통화로 표기되고 적어도 10의 이자율을 지닌 경우 그러한 대출이 체결 된 시점의 연방 중기 수수료 (제 1274 (d) 항에 따라 결정)보다 높은 퍼센트 포인트는 다음 규칙이 적용됩니다.
988 (a) (3) (C) (i) 제 904 조에서만 이러한 대출금은 연간 기준으로 시장에 표시되어야한다.
과세 연도에 대한 대출금과 관련하여 취득한이자 소득은 (i) 항에 기인 한 손실의 한도 내에서 미국 내 출처로부터의 소득으로 취급됩니다.
이 호의 목적 상, "관련자"라는 용어는 " "미국인"을 대체하여 적용되는 것을 제외하고는 제 954 조 (d) 항 (3) 호에 의해 그러한 용어가 부여 된 의미를 가진다. "외국 회사" 그러한 각 장소는 나타납니다.
988 (a) (3) (D) 10 % 소유 외국 법인.
용어 "10 % 소유 외국 법인" 이란 미국인이 직접 또는 간접적으로 투표권의 10 % 이상을 소유하고있는 외국 법인을 의미합니다.
988 (b) 외화 획득 또는 상실.
이 절의 목적 상 -
988 (b) (1) 외화 획득.
용어 "외화 이득" 이라 함은 예약 일자 또는 그 이후의 환율 변동으로 인해 실현 된 이익을 초과하지 않는 범위 내에서 거래 988 거래로부터 얻은 이익을 의미한다.
988 (b) (2) 외화 손실.
용어 "외화 손실" 은 해당 손실이 예약일 또는 그 이후의 환율 변동 사유로 실현 된 손실을 초과하지 않는 범위 내에서 거래가 이루어진 경우의 손실을 의미합니다.
988 (b) (3) 특정 계약 등에 대한 특별 규칙
(c) (1) (B) (iii) 항에 기술 된 섹션 988 거래의 경우, 그러한 거래로 인한 모든 손익은 외화 획득 또는 손실 (경우에 따라)로 취급됩니다.
988 (c) 기타 정의.
이 절의 목적 상 -
988 (c) (1) 항 988 항.
988 (c) (1) (A) 일반적으로.
용어 "섹션 988 트랜잭션" 이라 함은 납세자가 그러한 거래로 인하여 (또는 지불해야하는) 금액이있는 경우, (B) 호에 기술 된 거래를 의미한다.
988 (c) (1) (A) (i)는 비 기능 통화로 표기한다.
988 (c) (1) (A) (ii)는 1 개 이상의 비 기능 통화의 가치를 참고하여 결정됩니다.
988 (c) (1) (B) 거래 내역.
(A) 호의 목적을 위해, 다음의 거래가이 호에 기술된다.
988 (c) (1) (B) (i) 채무 증서를 취득하거나 채무 증서에 따라 채무자가되는 것.
988 (c) (1) (B) (ii) 본 부제의 목적을 위해 지출이나 총소득 또는 영수증을 발생 시키거나 고려.
988 (c) (1) (B) (iii) 선물 계약, 선물 계약, 옵션 또는 유사한 금융 상품에 진입하거나 인수.
총무는 제 (ii) 항의 적용을 제외하고, 소량 또는 단기간의 이유로 또는 다른 이유로이 절의 목적을 수행 할 필요가없는 사항을 고려한 규정을 규정 할 수있다.
988 (c) (1) (C) 비 기능 통화 처분을위한 특별 규칙.
988 (c) (1) (C) (i) 일반적으로.
비 기능 통화가 처분 된 경우 -
988 (c) (1) (C) (i) (I) 그러한 처분은 제 988 조 거래로서 취급되어야한다.
988 (c) (1) (C) (i) (II) 그러한 거래로 인한 모든 손익은 외화 획득 또는 상실로 처리해야한다.
988 (c) (1) (C) (ii) 비 기능 통화.
이 조의 목적 상, "비 기능 통화" 현금 또는 통화, 비 기능 통화로 표시된 수요 또는 정기 예금 또는 은행이나 기타 금융 기관에서 발행 한 유사한 수단을 포함합니다.
988 (c) (1) (D) 시장에 출시 된 특정 계기에 대한 예외.
988 (c) (1) (D) (i) 일반적으로.
(B)의 (iii) 절은 과세 연도의 마지막 날에 개최되는 경우 1256 항에 의거하여 시장에 표기 될 규제 선물 계약이나 비공개 옵션에는 적용되지 않습니다.
납세자는 (i) 해당 납세자에게 적용되지 않는 조항을 선택할 수 있습니다. 그러한 선거는 장관이 동의 한 경우를 제외하고 그러한 선거가 이루어진 과세 연도 또는 과세 연도 이후에 수시로 개최되는 계약에 적용된다.
988 (c) (1) (D) (ii) (II) 선거를위한 시간.
규정에 규정 된 경우를 제외하고, 과세 연도에 대한 하위 절 (I)에 의거 한 선거는 해당 과세 연도의 1 일 또는 그 이전에 행해져 야한다 (또는 나중에 납세자가 보유한 연도의 1 일 또는 그 이전에 선출) (i) 항에 기술 된 계약).
988 (c) (1) (D) (ii) (III) 파트너쉽 등에 대한 특별 규정
파트너쉽의 경우, 하위 조항 (I)에 의한 선거는 각 파트너가 별도로해야한다. S 회사의 경우에도 유사한 규칙이 적용됩니다.
988 (c) (1) (D) (iii) 특정 파트너쉽의 처리.
그러한 부속서가 해당 연도 또는 전년도에 (E) (ⅲ) (V) 호에 의거하여 선거를 실시한 경우, 이 호는 과세 연도에 대한 파트너십의 소득 또는 손실에 적용되지 아니한다.
988 (c) (1) (E) (i) 일반적으로.
유자격 기금의 경우, (B) 항의 조항 (iii)은 과세 연도의 마지막 날에 개최되는 경우 제 1256 조에 따라 시장 출시 될 것으로 판단되는 모든 금융 상품에 적용되지 않습니다 ( iv)).
988 (c) (1) (E) (ii) 선출 파트너쉽이 자격 미달 인 경우의 특별 규칙.
어떤 파트너쉽이 과세 연도에 대한 조항 (ⅲ) (Ⅴ)에 의거 한 선거를하고 그러한 파트너십이 (ⅰ) 항에 언급 된 문서로부터 당해 연도 또는 그 다음 해의 순손실이있는 경우, 조항 (ⅰ) 및 (iv) 해당 파트너쉽이 해당 연도의 적격 기금인지 여부와 상관없이 그러한 손실 연도에 적용해야한다.
988 (c) (1) (E) (iii) 적격 기금은 정한다.
이 호의 목적 상, "자격있는 기금"이라는 용어는 모든 파트너쉽을 의미합니다.
과세 연도 중 (그리고 하위 조항 (V)에 의거 한 선거가 실시 된 각 과세 연도 중), 그러한 파트너십은 최소 20 명의 파트너를 가지며 어떤 파트너도 자본이나 이익에 대한 이해 관계의 20 % 이상을 소유하지 않는다 파트너쉽의
그러한 과세 연도 (및 그 이전 과세 연도 각각)에 대한 그러한 파트너십의 주된 활동은 상품에 관한 옵션, 선물 또는 포워드를 매매하는 것으로 구성되며,
과세 연도 (및 그 이전 과세 연도 각각)에 대한 파트너쉽 총소득의 90 % 이상은 제 7704 (d) 호의 (A), (B) 또는 (G) 항에 기술 된 소득 또는 이익으로 구성된다. (1)이자 또는 배당 생산을 위해 보유한 자본 자산의 매각 또는 처분으로부터 얻은 이익,
과세 연도 (그리고 그러한 이전 과세 연도 각각)에 대한 파트너쉽 총소득의 최소 금액은 상품 구매 및 파생에서 파생되었다.
이 하위 조항에 따른 선거는 과세 연도에 적용됩니다.
과세 연도의 하위 항 (V)에 의거 한 선거는 해당 과세 연도의 1 일 또는 그 이전에 행해져 야한다. (또는 동등한 경우 해당 연도 중 첫 번째 날 또는 그 이전에 조항의 (나는)). 그러한 선거는 장관이 동의 한 경우를 제외하고는 과세 연도와 그 이후의 모든 과세 연도에 적용된다.
988 (c) (1) (E) (iv) 특정 통화 계약의 처리.
988 (c) (1) (E) (iv) (I) 일반적으로.
규정에 규정 된 경우를 제외하고, 자격있는 기금, 은행환 계약, 외환 거래가 된 외환 선물 계약 또는 이와 유사한 금융 상품을 규제하는 범위 내에서 제공되는 경우를 제외하고는, 1256 항의 목적을 위해 섹션 1256 계약으로 취급 될 수 있습니다.
988 (c) (1) (E) (iv) (II) 단기적으로 취급되는 손익.
하위 조항 (I)에 따라 1256 계약으로 취급되는 도구의 경우, 1256 (a) (3) 항의 하위 항목 (A)는 "100 %"로 대체하여 적용됩니다. "40 %" (그리고 그러한 절의 하위 절 (B)는 적용되지 않는다).
988 (c) (1) (E) (v) (iii) 항의 특별 규정 (i)
988 (c) (1) (E) (v) (I) 특정 일반 파트너.
파트너쉽의 일반 파트너의 이익은 파트너십의 과세 연도에 대한 (ⅲ) (I) 항의 20 % 소유권 요건을 충족시키지 못하는 것으로 간주되어서는 안된다. 파트너쉽 과세 연도가 종료되는 경우, 그러한 파트너 (및 그러한 파트너와의 연결 수익을 신고하는 각 회사)는 외화 획득 또는 손실 (경우에 따라) 인 988 항 거래로부터 경상적 이익이나 손실이 없었습니다.
988 (c) (1) (E) (v) (II) 인센티브 보상의 처리.
(iii) (I)의 목적 상, 파트너쉽의 이익에 대한 파트너의 이익 결정시 자본이 아닌 이익에 기반한 인센티브 보상으로 일반 파트너에게 할당 할 수있는 수입은 고려되지 않습니다.
988 (c) (1) (E) (v) (III) 면세 파트너의 면세.
규정에 규정 된 경우를 제외하고 파트너십의 파트너의 이익은 그러한 파트너십의 파트너로부터의 수입 중 어느 것도 (ii) (iii) (I)의 조건에 부합하지 않는 경우, 20 %의 소유권 요건을 충족시키지 못하는 것으로 취급되지 않는다. 이 장 (직접 또는 1 이상의 통과 단계 실체를 불문하고)에 따라 세금.
988 (c) (1) (E) (v) (IV) 룩 스루 규칙.
규정에서 정한 경우를 제외하고는, (ⅲ) (Ⅰ)의 요건이 다른 파트너십과 관련하여 충족되는지 여부를 결정할 때, 다른 파트너쉽이 보유한 파트너십에 대한이자는 다른 파트너 공동.
988 (c) (1) (E) (vi) 기타 특별 규정.
이 호의 목적 상,
988 (c) (1) (E) (vi) (I) 관련자.
(267 (b) 항과 (b) 항의 의미 내에서) 서로 관련이있는 사람들이 갖는 파트너쉽에 대한 이해는 1 인이 보유한 것으로 취급된다.
모든 파트너십에 대한 언급은 그 전임자에 대한 언급을 포함해야한다.
988 (c) (1) (E) (vi) (III) 부주의 한 종료.
섹션 7704 (e)의 규칙과 유사한 규칙이 적용됩니다.
988 (c) (1) (E) (vi) (IV) 특정 채무 증서의 처리.
(iii) (Ⅳ)의 목적 상, 제 988 조 거래인 채무 증서는 상품으로 취급되어야한다.
988 (c) (2) 예약 날짜.
용어 "예약 날짜" 방법--
988 (c) (2) (A) (1) (B) (i)에 기술 된 거래의 경우, 취득일 또는 납세자가 채무자가되는 일자.
988 (c) (2) (B) (1) (B) (ii)에 기술 된 거래의 경우, 누적되거나 다른 방식으로 고려 된 날짜.
988 (c) (3) 지불 일.
용어 "지불 일" 란 지불이 이루어 지거나 접수 된 날짜를 의미합니다.
988 (c) (4) 채무 증서.
용어 "채무 증서" 채권, 회사채, 채권, 증서 또는 기타 채무 증서를 의미합니다. 규정에서 정한 범위 내에서 그러한 기간에는 우선주가 포함되어야한다.
988 (c) (5) 납세자가 납입하거나 납부하는 특별 규칙.
납세자가 (1) (B) (iii) 항에 설명 된 섹션 988 거래와 관련하여 납품을하거나 납품하는 경우, 납세자가 (납세자가 계약, 옵션 또는 계측기를 그 날짜에 공정 시장 가격으로 인도를하거나 인수 한 경우) 그러한 계약, 선택권 또는 금융 상품이 그렇게 팔린 것과 같은 방식으로 인식되어야한다.
988 (d) 988 헷징 거래의 처리.
988 (d) (1) 일반적으로.
988 거래가 988 헷징 거래의 일부인 경우, 988 헷징 거래의 일부인 모든 거래는 통합되어 하나의 거래로 취급되거나이 부제의 목적을 위해 지속적으로 취급되어야합니다. 앞 문장의 목적 상 거래가 섹션 988 거래인지 여부에 대한 결정은 그러한 거래가 달리 표시 될 수 있는지 여부와 상관없이 결정되어야하며 475 또는 1256 항에 해당되는 거래는 포함되지 않습니다. 선거는 (a) (1) (B) 항에 의거하여 이루어진다. 섹션 492, 1092 및 1256 1은 본 하위 섹션에서 다루는 거래에는 적용되지 않습니다.
988 (d) (2) 988 헷징 거래.
단락 (1)의 목적 상, "988 헷징 거래"라는 용어는 모든 거래를 의미합니다.
988 (d) (2) (A)는 주로 납세자가 입력 한 것입니다.
988 (d) (2) (A) (i) 납세자가 보유하거나 보유 할 재산과 관련하여 환율 변동 위험을 관리하기 위해.
988 (d) (2) (A) (ii) 납세자가 납입 한 차입 또는 납부 의무 또는 발생 의무에 관한 환율 변동 위험을 관리하기 위해.
988 (d) (2) (B) 장관이나 납세자가 988 헷징 거래로 확인한 경우.
988 (e) 개인에게 적용 .--
988 (e) (1) 일반적으로 -
이 조의 앞선 조항은 개인 거래가 체결 된 개인이 체결 한 거래에 적용되지 않습니다.
988 (e) (2) 특정 개인 거래에 대한 배제 -
988 (e) (2) (A) 비 기능 통화는 모든 거래에서 개인이 처분합니다.
988 (e) (2) (B) 그러한 거래는 개인 거래이며,
그러한 통화가 그러한 개인에 의해 취득 된 후 그리고 그러한 처분 이전에 환율의 변화로 인해이 자막의 목적 상 인정되지 않는다. 거래에서 인정 된 이익이 $ 200를 초과하는 경우에는 위의 문장을 적용하지 않습니다.
988 (e) (3) 개인 거래 .--
이 항의 목적 상, '개인적 거래'라는 용어는 해당 거래에 적절히 할당 할 수있는 경비가 다음 요건을 충족시키는 범위 내에서의 거래를 포함하지 않는 한, 개인이 입력 한 거래를 의미합니다.
988 (e) (3) (A) 섹션 162 ((a) (2) 항에 기술 된 여행 경비를 제외하고).
988 (e) (3) (B) section 212 (세금과 관련하여 발생하는 비용을 다루는 section 212의 해당 부분 제외).
(1986 년 10 월 22 일 100 절, 개정판 L. 100-647, 제목 I, 1012 항 (v) 항에 추가 된 L. 99-514, 제목 XII, 1261 (a) (a), (b), 1988 년 11 월 10 일, 102 Stat. 3529, 3530, (b), (c) 3717, 출판 번호 101-239, 제목 VII, § 7811 (i) (7), 1989.12.19, 103. Stat.2410, 제 105-10 권, 제목 XI, 1104 ), 8 월 5 일, 1997, 111 스탯 788, 출판 번호 106-170, 제목 V, §532 (b), 1999.12.17, 113 스탯 1860)
내부 수익 코드 섹션 1256 계약.
섹션 1256 계약은 다음과 같습니다.
1. 규제 선물 계약,
2. 외화 계약,
4. 딜러 지분 옵션.
5. 딜러 증권 선물 계약.
1. 귀하의 마진 계정에 예치되어야하거나 마약 계정에서 철회 할 수있는 금액은 일일 시장 조건 (마켓팅 마킹 시스템)에 따라 달라집니다.
2. 자격있는 이사회에서 거래되거나 규칙에 따라야합니다. 자격을 갖춘 이사회는 상품 선물 거래위원회 (Commodity Futures Trading Commission), 재무 장관이 승인 한 무역 또는 교환위원회 또는 증권 거래위원회 (Securities and Exchange Commission)에 등록 된 국가 증권 거래소에 의해 계약 시장으로 지정된 국내 무역 이사회입니다.
1. 규제 선물 계약 (또는 그 화폐 종류에 따른 결제)을 통해 거래되는 포지션을 가진 외화를 납품해야합니다.
2. 은행 간 시장에서 거래되고있다.
3. 은행 간 시장 가격을 참고로 결정된 가격으로 팔 길이로 입력됩니다.
내부 수익 코드 초. 988. 특정 외화 거래의 처리.
이 조항에서 달리 규정하지 않는 한, 제 988 조 거래에 귀속되는 외화 차 손익은 별도로 계산되어 경상 이익 또는 손실로 처리됩니다 (경우에 따라).
Treas. 조례 §1.988-1 (a) (7)
1.988-1 (a) (7) 규제 선물 계약 및 비금융 옵션을위한 특별 규칙 -
1.988-1 (a) (7) (i) 일반적으로.
본 section의 paragraph (a) (7) (ii)에 규정 된 경우를 제외하고, 본 section의 paragraph (a) (2) (iii)는 시장에 표출 될 규제 선물 계약이나 비공식 옵션에는 적용되지 않는다. 과세 연도의 마지막 날에 개최되는 경우 1256 항에 의거 해
1.988-1 (a) (7) (ii) 본 절의 문단 (a) (2) (iii)을 갖는 선거가 적용됩니다.
본 section의 paragraph (a) (7) (i)에도 불구하고, 납세자는이 section의 paragraph (a) (2) (iii)를 paragraph (a)에 규정 된 규제 선물 계약과 비공식 옵션에 적용하도록 선택할 수있다. ) (7) (iii) 및 (iv)에 따라야한다.
1.988-1 (a) (7) (iii) 선거 절차.
납세자는 본 section의 paragraph (a) (7) (ii)에 규정 된 선거를 다음과 같은 성명서를 작성하여 캔자스 시티, 캔자스 시티, Stop Number 92, 국세청 서비스 센터 (Internal Revenue Service Center) 제 988 조 (c) (1) (D) (ii) "항에 의거 한 계약 및 비 적격 옵션 제 988 조 여기에는 다음이 포함됩니다.
1.988-1 (a) (7) (iii) (A) 납세자의 이름, 주소 및 납세자 식별 번호;
1.988-1 (a) (7) (iii) (B) 통지가 우편으로 발송되거나 기타 방법으로 국세청에 송부 된 날;
1.988-1 (a) (7) (iii) (C) 납세자 (제 1504 조에 정의 된 개인의 계열사의 모든 구성원을 포함하거나 개인과 공동으로 공동 연구를 제기하는 모든 개인을 포함 함) )는 988 (c) (1) (D) (i) 항과 1.988-1 (a) (7) 항 (i) 항을 적용하지 않는다.
1.988-1 (a) (7) (iii) (D) 선거가 실시되는 과세 연도의 시작 일자.
1.988-1 (a) (7) (iii) (E) 과세 연도의 첫 번째 날 이후에 선거가 이루어진 경우, 납세자가 이전에 988 (c) (1) (D) (i) 또는 제 1.988-1 (a) (7) (ⅰ)에 해당하는 경우, 해당 계약이 체결 된 과세 연도 중 첫 번째 날짜; 과.
1.988-1 (a) (7) (iii) (F) 선거를하는 사람의 서명 (공동 반환을하는 개인의 경우 그러한 반환을하는 모든 사람의 서명).
선거는 다음 사람에 의해 이루어져야한다 : 개인의 경우, 해당 개인; 파트너쉽의 경우, 각 파트너는 별도로; 1992 년 3 월 17 일 이후 시작되는 과세 연도부터, 계층 형 파트너십의 경우 각 최종 파트너; in the case of an S corporation, by each shareholder separately; in the case of a trust (other than a grantor trust) or estate, by the fiduciary of such trust or estate; in the case of any corporation other than an S corporation, by such corporation (in the case of a corporation that is a member of an affiliated group that files a consolidated return, such election shall be valid and binding only if made by the common parent, as that term is used in section 1.1502-77(a)); in the case of a controlled foreign corporation, by its controlling United States shareholders under section 1.964-1(c)(3). With respect to a corporation (other than an S corporation), the election, when made by the common parent, shall be binding on all members of such corporation's affiliated group as defined in section 1504 that file a consolidated return. The election shall be binding on any income or loss derived from the partner's share (determined under the principles of section 702(a)) of all contracts described in section 988(c)(1)(D)(i) or paragraph (a)(7)(i) of this section in which the taxpayer holds a direct interest or indirect interest through a partnership or S corporation; however, the election shall not apply to any income or loss of a partnership for any taxable year if such partnership made an election under section 988(c)(1)(E)(iii)(V) for such year or any preceding year. Generally, a copy of the election must be attached to the taxpayer's income tax return for the first year it is effective. It is not required to be attached to subsequent returns. However, in the case of a partner, a copy of the election must be attached to the taxpayer's income tax return for every year during which the taxpayer is a partner in a partnership that engages in a transaction that is subject to the election.
1.988-1(a)(7)(iv) Time for making the election--
1.988-1(a)(7)(iv)(A) In general.
Unless the requirements for making a late election described in paragraph (a)(7)(iv)(B) of this section are satisfied, an election under section 988(c)(1)(D)(ii) and paragraph (a)(7)(ii) of this section for any taxable year shall be made on or before the first day of the taxable year or, if later, on or before the first day during such taxable year on which the taxpayer holds a contract described in section 988(c)(1)(D)(ii) and paragraph (a)(7)(ii) of this section. The election under section 988(c)(1)(D)(ii) and paragraph (a)(7)(ii) of this section shall apply to contracts entered into or acquired after October 21, 1988, and held on or after the effective date of the election. The election shall be effective as of the beginning of the taxable year and shall be binding with respect to all succeeding taxable years unless revoked with the prior consent of the Commissioner. In determining whether to grant revocation of the election, recapture of the tax benefit derived from the election in previous taxable years will be considered.
A taxpayer may make an election under section 988(c)(1)(D)(ii) and paragraph (a)(7)(ii) of this section within 30 days after the time prescribed in the first sentence of paragraph (a)(7)(iv)(A) of this section. Such a late election shall be effective as of the beginning of the taxable year; however, any losses recognized during the taxable year with respect to contracts described in section 988(c)(1)(D)(ii) or paragraph (a)(7)(ii) of this section which were entered into or acquired after October 21, 1988, and held on or before the date on which the late election is mailed or otherwise delivered to the Internal Revenue Service Center shall not be treated as derived from a section 988 transaction. A late election must comply with the procedures set forth in paragraph (a)(7)(iii) of this section.
1.988-1(a)(7)(v) Transition rule.
An election made prior to September 21, 1989 which satisfied the requirements of Notice 88-124, 1988-51 I. R.B. 6, shall be deemed to satisfy the requirements of paragraphs (a)(7)(iii) and (iv) of this section.
1.988-1(a)(7)(vi) General effective date provision.
This paragraph (a)(7) shall apply with respect to futures contracts and options entered into or acquired after October 21, 1988.
Treas. Regulations §1.988-3 Character of exchange gain or loss.
1.988-3(a) In general.
1.988-3(b)(1) In general.
Except as provided in paragraph (b)(2) of this section, a taxpayer may elect, subject to the requirements of paragraph (b)(3) of this section, to treat any gain or loss recognized on a contract described in section 1.988- 2(d)(1) as capital gain or loss, but only if the contract --
If a valid election under this paragraph (b) is made with respect to a section 1256 contract, section 1256 shall govern the character of any gain or loss recognized on such contract.
If a contract which is the subject of an election under paragraph (b)(1) of this section becomes part of a straddle within the meaning of section 1092 (c) (without regard to subsections (c)(4) or (e)) after the date of the election, the election shall be invalid with respect to gains from such contract and the Commissioner, in his sole discretion, may invalidate the election with respect to losses.
A taxpayer that has made an election under section 1.988-3(b)(3) must attach to his income tax return a statement which sets forth the following:
If the taxpayer receives independent verification of the election in paragraph (b)(3) of this section, the taxpayer shall be presumed to have satisfied the requirements of paragraphs (b)(3) and (4) of this section. A contract that is a part of a straddle as defined in section 1092 may not be independently verified and shall be subject to the rules of paragraph (b)(2) of this section.
A taxpayer receives independent verification of the election in paragraph (b)(3) of this section if --
INTERNAL REVENUE SERVICE NATIONAL OFFICE FIELD SERVICE ADVICE.
MEMORANDUM FOR ASSOCIATE DISTRICT COUNSEL.
FROM: DEBORAH A. BUTLER ASSISTANT CHIEF COUNSEL CC:DOM:FS.
SUBJECT: Section 1256 Contracts and Section 988 Transactions.
5. If C is viewed as an agent of A, its trading activity may be aggregated with A's activity in determining whether he was a trader or investor.
short n' sweet explanation found elsewhere on the web.
short n' sweet explanation #2 as suggested by larger hedge funds.
Section 988 gain or loss.
National Futures Association (NFA) is the industry-wide, self-regulatory organization for the U. S. futures industry.
FOREX Education site:
IRS Publication 550:
Loss transactions . For individuals, a loss transaction is any transaction that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year , whether or not the loss flows through from an S corporation or partnership.
IRS Publication 334:
Reportable transactions . You must file Form 8886 , Reportable Transaction Disclosure Statement, to report certain transactions. You may have to pay a penalty if you are required to file Form 8886 but do not do so. You may also have to pay interest and penalties on any reportable transaction understatements. Reportable transactions include (1) transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, (3) transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, (4) transactions that result in losses of at least $2 million in any single tax year ( $50,000 if from certain foreign currency transactions ) or $4 million in any combination of tax years, (5) transactions resulting in book-tax differences of more than $10 million on a gross basis, and (6) transactions with asset holding periods of 45 days or less and that result in a tax credit of more than $250,000. For more information, see the Instructions for Form 8886.
IRS Schedule C instructions:
Reportable Transaction Disclosure Statement : Use Form 8886 to disclose information for each reportable transaction in which you participated. Form 8886 must be filed for each tax year that your federal income tax liability is affected by your participation in the transaction . You may have to pay a penalty if you are required to file Form 8886 but do not do so. You may also have to pay interest and penalties on any reportable transaction understatements. The following are reportable transactions.
Any transaction resulting in a loss of at least $2 million in any single tax year or $4 million in any combination of tax years. (At least $50,000 for a single tax year if the loss arose from a foreign currency transaction defined in section 988(c)(1) , whether or not the loss flows through from an S corporation or partnership.) Any transaction resulting in a book-tax difference of more than $10 million on a gross basis.
1. Reportable transaction disclosure statement.
2. Tax shelter registration number.
Use Form 8886 to disclose information for each reportable transaction in which you participated. Generally, you must attach Form 8886 to your return for each year that your tax liability is affected by your participation in the transaction. In addition, for the first year Form 8886 is attached to your return, you must send a copy to:
Large & Mid-Size Business Division.
1111 Constitution Avenue, NW.
Washington, DC 20224.
The following discussion briefly describes reportable transactions. For more details, see the instructions for Form 8886.
A reportable transaction is any of the following.
• A listed transaction.
• A confidential transaction.
• A transaction with contractual protection.
• Transactions with a brief asset holding period. This category includes transactions that result in your claiming a tax credit (including a foreign tax credit) of more than $250,000 if the asset giving rise to the credit was held by you for 45 days or less.
Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886 (see Form 8886 instructions). For information on other exceptions, see Revenue Procedure 2003-24 in Internal Revenue Bulletin 2003-11. This Internal Revenue Bulletin is available at irs. gov/pub/irs-irbs/irb03-11.pdf.
Internal Revenue Code Sec. 988 Tax Shelter.
"Notice 2003-81" Tax Shelter.
Effective Date: July 26, 2005.
Coordinated Issue Paper, All Industries, "Notice 2003-81" Tax Shelter, UIL 9300.31-00.
소개.
On December 4, 2003, the Service issued Notice 2003-81, 2003-2 C. B. 1223,
announcing that it will challenge transactions involving the assignment of offsetting.
foreign currency options to a charity in order to claim substantial artificial net losses and identifying these transactions as listed transactions for purposes of I. R.C. §§6011, 6111, and 6112. The transaction is designed to create an overall net loss (either ordinary or capital) when a taxpayer transfers two foreign currency contracts to a charity where only one such contract is subject to the mark-to-market rules contained in I. R.C. §1256.
SUMMARY OF CONCLUSIONS.
Taxpayers deployed Notice 2003-81 transactions in order to offset substantial taxable income (either capital or ordinary) . Taxpayers initiated the transactions by entering into an investment management agreement and opening a trading account managed by the promoter, who is also a registered investment advisor. Generally, the initial capital investment is determined by the anticipated loss needed. The required investment amount is equal to either (1) 15% of the desired ordinary loss or (2) 10% of the desired capital loss. The taxpayer agrees to leave the funds in the account for a five-year period, although funds can be withdrawn at any time subject to significant monetary penalties. A small portion, approximately 1.75%, of the initial capital investment is used to establish a foreign currency trading account that is used to purchase foreign currency option contracts. The remaining balance is invested in a hedge fund of funds that in turn invests in a variety of investment vehicles including other hedge funds, stock funds, commodity funds and currency funds.
The foreign currency "investment" strategy involves the purchase and sale of a series of foreign currency option contracts denominated in both a foreign currency in which positions are traded through regulated futures contracts and a foreign currency that is not traded through regulated futures contracts. The values of the two currencies underlying the options (i) historically have demonstrated a very high positive correlation with one another, or (ii) officially have been linked to one another, such as through the European Exchange Rate Mechanism ("ERM II"). 1 In one version, the taxpayer buys two 180-day European-style digital currency options, pegged to fluctuations in the exchange rate between the U. S. dollar and the euro. These positions are in a foreign currency traded through regulated futures contracts, and thus the taxpayer takes the position that such positions are I. R.C. §1256(g)(2)(A) foreign currency contracts. In the promotional materials, these contracts are referred to as the "major options." At the same time, the taxpayer sells two 180-day European-style digital currency options, pegged to fluctuations in the exchange rate between the U. S. dollar and a stated European currency. The European currency is one in which positions are not traded on a qualified board or exchange and are not I. R.C. §1256(g)(2)(A) foreign currency contracts. In the promotional materials, these contracts are referred to as the "minor options." The counterparty is the same for all four currency contracts. Therefore, the initial cash outlay to enter into the foreign currency positions is limited to the net premium among the offsetting contracts.
In a more complex variation of the transaction, the taxpayer enters into a series of 180-day European-style digital options on the same day. Usually, the taxpayer buys two put options and sells two call options pegged to fluctuations in the exchange rate between the U. S. dollar and the euro. This group of options comprises the "major options." The taxpayer also buys two call options and sells two put options, pegged to fluctuations in the exchange rate between the U. S. dollar and a stated European currency. This group of options comprises the "minor options ." Again, the counterparty is the same for all eight currency contracts and the initial cash outlay is relatively small in reference to the stated notional amounts of the contracts. In some deals, the taxpayer will enter into a second series of 180-day European-style options on the following day.
The values of the respective currencies underlying the foreign currency transactions historically have demonstrated a very high positive correlation with one another. Therefore, the major options will move inversely to the minor options such that any gain in a major foreign currency position will be largely offset by a corresponding, though not always identical, loss in a minor foreign currency position. The bank, which serves as counterparty for these deals, generally makes representations to the taxpayer and trader concerning the statistical probabilities of the potential rate of return from the option positions indicating a profit is possible but unlikely. In fact, according to the analysis provided by the bank, there is usually a better than 50% chance that the taxpayer will lose its entire investment.
C. Assignment of Major and Minor Contract to Charity.
Prior to the exercise date, that taxpayer assigns two of its open foreign currency contracts to a charity. The first contract is a major currency option contract that is in a loss position at the time of assignment. The taxpayer also assigns the obligation that is associated with a minor currency option contract that is in a gain position at the time of assignment of the obligation. The taxpayer takes the position that (1) the assignment of the major contract (i. e., I. R.C. §1256 contract) is treated as a termination of the contract requiring recognition of the inherent gain or loss in such contract; and (2) the assignment of the minor contract obligation does not trigger the recognition of income because that contract is not covered by the mark-to-market provisions contained in I. R.C. §1256.
D. Reporting of Transaction for Federal Income Tax Purposes.
In some cases, the taxpayer will report the listed transaction on Form 4797, Part II ,
Ordinary Gains and Losses as an I. R.C §988 foreign currency transaction. The loss claimed is a direct result from the disparate reporting of the donated major and minor contracts. The major contract in a loss position and the remaining option contracts that are not assigned to the charity are accounted for on Form 4797. The remaining option contract positions when closed effectively offset one another. The reporting exclusion of the gain from the donated minor contract, which closely mirrors the loss reported from the donated major contract, creates the artificial loss claimed by the taxpayer. In other cases, the taxpayer will report the listed transaction on Schedule D , Capital Gains & 사상자 수. In these instances, the taxpayer makes an election pursuant to I. R. C. §988(a)(1)(B) and Treas. Reg. §1.988-3(b)(4) to treat its foreign currency contracts as capital assets in order to claim a capital loss. The taxpayer is required to attach a verification statement to its filed return for a valid capital treatment election.
DISCUSSION.
1. A taxpayer remains obligated to take into income the premium that it received when it writes a "minor" foreign currency option contract and later transfers the obligation associated with that written option to a charity.
Gain and loss on options is accounted for on an open transaction basis. As explained in Notice 2003-81, the justification for open transaction treatment is that the gain or loss on an option cannot be finally accounted for until such time as the option is terminated. Thus, premium income is not recognized until an option is sold or terminated. Rev. Rul. 58-234, 1958-1 C. B. 279, Accord Rev. Rul. 78-182, 1978-1 C. B. 265; Koch vmissioner , 67 T. C. 71 (1976), a cq . 1980-2 C. B. 1. Rev. Rul. 58-234 explains that this is the treatment for the option writer because the option writer assumes a burdensome and continuing obligation, and the transaction therefore stays open without any ascertainable income or gain until the writer's obligation is finally terminated. When the option writer's obligation terminates, the transaction closes, and the option writer must recognize any income or gain attributable to the prior receipt of the option premium.
Though each taxpayer's transaction should be evaluated independently, the assignment documents reviewed to date have been three-party arrangements (involving the option writer, holder and charity) that seem to give rise to a novation of the option contracts. Where there is a novation, the option writer's obligation under the minor option contract terminates on the charity's assumption of the written option obligation. However, in other cases where a novation does not occur, the writer of the minor foreign currency option writer may well have a continuing obligation because the writer may be called upon to perform if the charity fails to perform or to reimburse the charity for any losses or expenses it may incur if called upon to perform.
If an assumption of the liability by the charity causes the option writer's obligation under the option contract to terminate, then the option writer must recognize gain upon assignment, when the option obligation is assumed. Notice 2003-81. If the assumption does not terminate the option writer's obligation under the option contract, the option writer must recognize the premium when the option writer's obligation under the option contract terminates (other than through an exercise of the option against, and performance by, the option writer). Notice 2003-81. It is generally understood that charities that received these options may have terminated them either contemporaneous with or shortly after the assignments.
Even if a novation did not occur to cause premium income to be recognized, there is still no support for the apparent contention that responsibility for recognizing premium income shifts to the charity as a result of the assignment of the obligation on the written option. At least some of the tax promotional materials associated with this shelter transaction suggest that the gain or premium income received by the taxpayer on the written option must be recognized by the charity (but goes untaxed because of its taxexempt status). However, there is no support for this "too good to be true" result. Rather, the taxpayers and their advisors seem to simply assume that a taxpayer can receive premium income, pass off the obligation associated with having received that premium and not be taxed on the premium. No discussion was found in the materials , including an undated draft shelter memorandum ("Shelter Memorandum"), that explains why the premium received by the taxpayer is not a taxable accession to wealth of the taxpayer. Nor is there any explanation as to how a charity could be taxed on this premium that the charity does not receive.
There is some hint in the promotional materials that the promoters may have been seeking to pass off the transfer of the obligation on the written minor option as a "donation." Generally, taxpayers do not recognize gain upon transfer of appreciated property to a qualified charity. See Rev. Rul. 55-138, 1955-1 C. B. 223, modified on other grounds by Rev. Rul. 68-69, 1968-1 C. B. 80. In these challenged transactions, however, property rights were not transferred – only the obligation associated with the out-of-the money (losing) purchased option was transferred. The assumption of an obligation is not a donation of property to which I. R.C. §170 applies. Rather it is a disposition event governed by I. R.C. §1001. Crane v. Commissioner , 331 U. S. 1 (1947). If the assumption of the obligation by the charity also involves the donation of associated property, I. R.C. §1001(b) applies and the transaction is treated as a bargain sale. 2 Treas. Reg. §1.1011-2(a)(3); Ebben v. Commissioner , 783 F.2d 906 (9th Cir. 1986). Thus, to the extent there was a transfer of property along with an associated obligation, the taxpayers were, in general, properly advised in this scheme that their charitable deduction for the donated purchased option rights would be reduced by the amount of liability relief provided by the charity that assumed the obligation on the written minor option.
In short, contrary to the advice apparently received by the taxpayers, there is no factual or legal basis for the contention that taxpayers in these shelters shifted the responsibility for recognizing the premium income or gain on the written minor option position to a charity. Rather, the taxpayers only transferred an obligation and must be taxed on the premium that they retain. 삼.
2. A taxpayer did not obtain a timing benefit because section 1092 does not permit a taxpayer to recognize loss in advance of gain on the offsetting foreign currency contracts.
For several reasons, this foreign currency shelter transaction did not provide a timing benefit to participating taxpayers.
As explained in issue 1, the open transaction doctrine deferred a taxpayer's recognition of premium income only until it became possible to finally account for the option transaction. As also indicated, a taxpayer will be required to pick up premium income on the minor option at the same time as loss is allowed on the major option under I. R.C. §1256(c) if there was a novation of the minor option. However, even if a novation did not occur, a taxpayer was still required to recognize income when that taxpayer's secondary obligation under the written minor option contract terminated. That may have occurred in the same tax year as the assignment because the options were short term and are understood to have been closed out by the charities either contemporaneous with or shortly after assignment.
However, even if a charity kept open the written option obligation beyond the year of assignment, a taxpayer still would not have obtained an overall timing advantage. As indicated in Notice 2003-81, the purchased major foreign currency option and the written minor foreign currency option are substantially offsetting positions. Consequently, such positions were parts of a straddle subject to I. R.C. §1092. Thus, under I. R.C. §1092, any mark-to-market loss on the contributed major foreign currency option would have been appropriately deferred to the extent of the taxpayer's unrecognized gain on the written minor foreign currency option.
3. The taxpayer's loss is not a bona fide loss allowable under I. R.C. §165.
I. R.C . §165(a) provides that there shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise. Treas. Reg. §1.165-1(b) provides that to be allowable as a deduction under I. R.C. §165(a), a loss must be evidenced by closed and completed transactions, fixed by identifiable events, and, except as otherwise provided in I. R.C. §165(h) and Treas. Reg. §1.165-11 (relating to disaster losses), actually sustained during the taxable year. Under I. R.C. §165(b), the amount of the loss from the sale or other disposition of property is the adjusted basis provided in I. R.C. §1011. Treas. Reg. §1.165-1(b) further states that only a bona fide loss is allowable and that substance and not mere form shall govern in determining a deductible loss. See also ACM Partnership v. Commissioner , 157 F.3d 231, 252 (3d Cir. 1998), cert. denied , 526 U. S. 1017 (1999) ["Tax losses . . . which do not correspond to any actual economic losses, do not constitute the type of ‘bona fide' losses that are deductible under the Internal Revenue Code and regulations"]. Section 165(c) provides that, in the case of an individual, the deduction under §165(a) is limited to losses incurred in a trade or business, losses incurred in a transaction entered into for profit, and certain casualty or theft losses.
In this case, the taxpayer has suffered no real economic loss because the acquisition and disposition of the offsetting option contracts constitute an economically inconsequential investment, with the taxpayer effectively in the same economic position as prior to the purported investment strategy less fees paid to the promoter. See ACM Partnership v. Commissioner , 157 F.3d at 251-252. Accordingly, the loss is not allowable under I. R.C. §165.
I. R.C . §165(c) also disallows the loss for an individual taxpayer. The "loss" in this transaction is not incurred in a trade or business or from a casualty or theft, within the meaning of I. R.C. §165(c)(1) and (3). Therefore, a loss in this transaction is only allowable for an individual if it is incurred in a transaction undertaken for profit. I. R.C. §165(c)(2); Fox v. Commissioner , 82 T. C. 1001 (1984); Smith v. Commissioner , 78 T. C. 350 (1982). For the loss to be allowable, a profit motive must be the taxpayer's primary motive for engaging in the transaction. Fox v. Commissioner , 82 T. C. at 1020-21 [citing Helvering v. National Grocery Co ., 304 U. S. 282, 289 n.5 (1938)].
The taxpayer's potential profit from this transaction, apart from tax savings, is statistically improbable. Moreover, any profit generated would likely be derived from the capital that was invested in the hedge fund of funds rather than the small amount of capital used to acquire the major and minor contracts. In fact, the tax materials distinguish the two investment components by opining that the "possible profits" from the tax-driven currency option trading and the "expected profits" from investing in the hedge funds create sufficient "economic substance". Therefore, it is unlikely that a taxpayer can demonstrate a reasonable expectation to earn more than minimal profit solely from the foreign currency investment strategy described above, apart from tax savings. See Knetsch v. United States , 348 F.2d 932, 938 (Ct. Cl. 1965) [The statutory definition of profit under I. R.C. §165(c)(2) "cannot embrace profit seeking activity in which the only economic gain derived therefrom results from a tax reduction."]. Therefore, the loss is disallowed under I. R.C. §165(c)(2).
4. The taxpayer's loss is limited by the I. R.C. §465 at-risk provisions.
I. R.C . §465 generally limits deductions for losses in certain activities to the amount for which the taxpayer is at-risk. In the case of an individual taxpayer, I. R.C. §465 limits the taxpayer's losses to the amount for which the taxpayer is at risk in the activity. I. R.C. §465(a)(1). I. R.C. §465 applies to all activities engaged in by the taxpayer in carrying on a trade or business or for the production of income. I. R.C. §465(c)(3)(A). Under those sections, losses incurred in an activity engaged in by a taxpayer carrying on a trade or business or for the production of income is defined broadly to include "excess of the allowable deductions allocable to the activity over the income received or accrued by the taxpayer during the taxable year from the activity." Lansburgh v. Commissioner , 92 T. C. 448, 454-55 (1989). This interpretation is supported by the legislative history of I. R.C. §465 that provides the at risk limitation applies to losses "regardless of the kind of deductible expenses which contributed to the loss." S. Rept. 94-938, at 48 (1976), 1976-3 C. B. (Vol.3) 86. In this case, I. R.C. §465 applies to the loss stemming from taxpayer's purchase of the foreign currency option contracts.
The amount at-risk includes the amount of money and the adjusted basis of any property contributed by the taxpayer to the activity, and any amounts borrowed with respect to the activity to the extent that the taxpayer is personally liable to repay the amount, and to the extent of the fair market value of the taxpayer's interest in property, not used in the activity, pledged as security for the borrowed amount. I. R.C. §465(b)(1) and (2). Amounts protected against loss by nonrecourse financing, guarantees, stop loss agreements, or other similar arrangements, however, are not at-risk. I. R.C. §465(b)(4). The Senate report promulgated in connection with I. R.C. §465 states in pertinent part that "a taxpayer's capital is not ‘at risk' in the business, even as to the equity capital which he has contributed to the extent he is protected against economic loss of all or part of such capital by reason of an agreement or arrangement for compensation or reimbursement to him of any loss which he may suffer." S. Rept. No. 94-938, Pt. I at 49, 94th Cong., 2d Sess. (1976).
The at-risk rules in I. R.C. §465 are most commonly applied to cases involving nonrecourse liabilities; however, neither the statutory language nor the legislative history interprets the at-risk rules that narrowly. The legislative history notes that the overall purpose of the at-risk rules is to "prevent a situation where the taxpayer may deduct a loss in excess of his econo mic investment in certain types of activities." S. Rept. No. 938, Pt. I at 48, 94th Cong., 2d Sess. (1976). The legislative history also provides that in evaluating the amount at-risk, it should be assumed that a loss-protection guarantee, repurchase agreement or other loss limiting mechanism will be fully paid to the taxpayer. S. Rep. No. 938, 94th Cong., 2d Sess. 50 n.6 (1976), C. B. 1976-3 at 88. Although the foregoing assumption regarding loss-limiting arrangements does not explicitly claim to interpret I. R.C. §465(b)(4), more than one circuit has found such an interpretation to be reasonable. See e. g., Moser v. Commissioner , 914 F.2d 1040, 1048 (8th Cir. 1990); American Principals Leasing Corp. v. Commissioner , 904 F.2d 477, 482 (9th Cir. 1990) [assuming in both cases that the reference to loss-limiting arrangements in I. R.C. §465 legislative history refers to I. R.C.§465(b)(4)]. I. R.C. §465(b)(4) limits losses to amounts at risk where a transaction is structured, by whatever method, to remove any realistic possibility that the taxpayer will suffer an economic loss. A theoretical possibility of economic loss is insufficient to avoid the suspension of losses. See Levien vmissioner , 103 T. C. 120, 125 (1994).
The case law, however, is not in complete accord on this issue. In Emershaw v. Commissioner , 949 F.2d 841, 845 (6th Cir. 1991), the court adopted a worst-case scenario approach and determined that the issue of whether a taxpayer is "at risk" for purposes of I. R.C. §465(b)(4) "must be resolved on the basis of who realistically will be the payor of last resort if the transaction goes sour and the secured property associated with the transaction is not adequate to pay off the debt." quoting Levy v. Commissioner , 91 T. C. 838, 869 (1988). In contrast, the Second, Eighth, Ninth, and Eleventh Circuits look to the underlying economic substance of the arrangements under I. R.C. §465(b)(4). Waters v. Commissioner , 978 F.2d 1310, 1316 (2d Cir. 1992) (citing American Principals Leasing Corp v. United States , 904 F.2d 477, 483 (9th Cir. 1990); Young v. Commissioner , 926 F.2d 1083, 1089 (11th Cir. 1991); Moser v. Commissioner , 914 F.2d at 1048-49. The view, as adopted by these circuits, is that, in determining who has the ultimate liability for an obligation, the economic substance and the commercial realities of the transaction control. See Waters v. Commissioner , 978 F.2d at 1316; Levien v. Commissioner , 103 T. C. 120; Thornock v. Commissioner , 94 T. C. 439, 448 (1990); Bussing v. Commissioner , 89 T. C. 1050, 1057 (1987). To determine whether a taxpayer is protected from ultimate liability, a transaction should be examined to see if it "is structured - by whatever method - to remove any realistic possibility that the taxpayer will suffer an economic loss if the transaction turns out to be unprofitable." American Principals Leasing Corp. v. United States , 904 F.2d at 483; See Young v. Commissioner , 926 F.2d at 1088; Thornock v. Commissioner , 94 T. C. at 448-49; Owens v. United States , 818 F. Supp. 1089, 1097 (E. D. Tenn. 1993); Bussing v. Commissioner , 89 T. C. at 1057-58. "[A] binding contract is not necessary for [I. R.C. §465(b)(4)] to apply." American Principals Leasing Corp. v United States , 904 F.2d at 482-83. In addition, "the substance and commercial realities of the financing arrangements presented . . . by each transaction" should be taken into account under I. R.C. §465(b)(4). Thornock v. Commissioner , 94 T. C. at 449. To avoid the application of I. R.C. §465(b)(4), there must be more than "a theoretical possibility that the taxpayer will suffer economic loss." American Principals Leasing Corp. v United States , 904 F.2d at 483.
In the typical "Notice 2003-81" deal, the counterparty to all the foreign currency contracts is the same. Due to the fact that the currency movements between the euro and European currency used in the minor contracts closely parallel each other, the taxpayer's cash investment is relatively small. The transaction is carefully structured so that any gain in one option position is largely offset by a loss in another contract. Therefore, the taxpayer's true at-risk amount equals the net out of pocket premium paid to acquire the aggregate offsetting foreign currency positions.
5. The taxpayer's loss is disallowed because the transaction as a whole lacks economic substance and business purpose apart from tax savings.
In addition to the statutory provisions discussed herein, the taxpayer's purported loss may be disallowed under the economic substance doctrine. This approach would deny the tax benefits arising because the transaction does not result in a meaningful change to the taxpayer's economic position other than the manufactured loss that results in the purported reduction in tax. See Knestch v. United States , 364 U. S. 361 (1960). The Tax Court has stated that tax law "requires that the intended transactions have economic substance separate and distinct from economic benefit achieved solely by tax reduction." ACM Partnership v. Commissioner , T. C. Memo. 1997-115, aff'd in part and rev'd in part , 157 F.3d 231 (3rd Cir. 1998). Accordingly, this doctrine is applicable to the typical Notice 2003-81 transaction where the purported tax benefits are unintended by Congress and accomplished by a prearranged deal that serves no economic purpose apart from tax savings.
In determining whether a transaction is to be respected for tax purposes, both the objective economic substance of the transaction and the subjective business motivation are considered. ACM Partnership v. Commissioner , 157 F.3d 231, 247 (3d Cir. 1998); Horn v. Commissioner , 968 F.2d 1229, 1237 (D. C. Cir. 1992); Casebeer v. Commissioner , 909 F.2d 1360, 1363 (9th Cir. 1990). Some courts apply a conjunctive analysis that requires a taxpayer to establish the presence of both economic substance (i. e., objective test) and business purpose (i. e., subjective test to determine whether the taxpayer intended the transaction to serve some useful non-tax purpose). See Pasternak v. Commissioner , 990 F.2d 893, 898 (6th Cir. 1993). Other courts apply a less stringent test that either a subjective business purpose or actual economic substance is sufficient. Rice's Toyota World v. Commissioner , 752 F.2d 89, 91-92 (4th Cir. 1985). An alternative analysis views economic substance and business purpose as "simply more precise factors to consider" in determining whether a transaction has any practical economic effects other than the tax benefits created. ACM Partnership v. Commissioner , 157 F.3d at 247. See also Casebeer v. Commissioner , 909 F.2d at 1363; Sacks v. Commissioner , 69 F.3d 982, 985 (9th Cir. 1995); James v. Commissioner , 899 F.2d 905, 908 (10th Cir. 1995). In addition, several courts have applied the economic substance doctrine where a taxpayer was exposed to limited risk and the transaction had a theoretical potential for profit but the profit potential was nominal and insignificant when compared to the tax benefit derived. Gregory v. Helvering , 293 U. S. 465 (1935) [Transaction that is entered into for the primary purposes of creating a loss is subject to special scrutiny to determine whether such loss was bona fide]; Knetsch v. United States , 364 U. S. 361 (1960) [Leveraged acquisition of Treasury bills and accompanying prepaid interest deduction lacked economic substance]; Goldstein v. Commissioner , 364 F.2d 734 739-40 (2d Cir. 1966)[Deduction disallowed even though taxpayer has a possibility of small gain or loss from ownership of Treasury bills]; Sheldon v. Commissioner , 94 T. C. 738, 768 (1990)[Loss disallowed from prearranged substantially offsetting transaction where profit potential "infinitesimally nominal and vastly insignificant" in comparison to loss claimed]; Rice's Toyota World v. Commissioner , 752 F.2d at 94; [Economic substance inquiry requires an objective determination of whether reasonable possibility of profit existed apart from tax benefits]. See also Compaq Computer Corp v. Commissioner , 277 F.3d at 781; IES Industries v. United States , 253 F.3d at 354 [Applying same objective economic substance test discussed in Rice's Toyota World ].
The doctrine of economic substance should be raised in cases where the facts show that the transaction at issue was primarily designed to generate the tax losses, with little if any possibility for profit, and that such was the expectation of all the parties to the transaction. The wide variety of facts required to support its application should be developed at examination. The administrative record should include documents obtained from the taxpayer, the promoter and other third parties; interviews with the same; and expert analysis of financial data and industry practices. Summonses should be promptly issued whenever necessary to obtain the requisite transactional documents.
In addition to evidence that shows a lack of pre-tax profit potential, facts should be developed demonstrating that the taxpayer and the promoter primarily planned the transaction for tax purposes. Such evidence should include the following: (1) documents or other evidence that the foreign currency option contracts were sold as tax shelters with limited consideration of the underlying economics of the transaction; and (2) evidence that a prudent investor would not have invested in the strategy but for the tax savings. A primary source of such evidence is correspondence between the promoter and the taxpayer, including, but not limited to, offering memos, letters identifying tax goals, e - mails and in-house communications at the offices of the promoter and any other third party involved in the strategy. Written correspondence is the best evidence, but evidence of oral communications regarding tax goals is also useful. Indirect sources of the same include correlations between tax losses generated and tax losses requested, and between the taxpayer's income and the tax losses generated, particularly if it can be shown that the income to be sheltered was attributable to an unusual windfall, like the liquidation of stock options, or sale of a business. Demonstrations of similarities of the nature and extent of tax losses acquired by other clients of the promoter in this shelter can be very important as well.
In the typical case, the transaction fails both prongs of the economic substance analysis. The following facts underscore a lack of a legitimate potential or realistic possibility for a pre-tax profit (i. e objective prong): First, the taxpayer's profit potential from the aggregate foreign currency options is severely limited by the offsetting nature of the respective contracts. Although not a traditional straddle, the option contracts create substantially offsetting positions whereby any gain in one contract is offset in another contract. Second, the profit, if any, would be derived from the contractual provision that required a payment equal to twice the premium amount to the holder if the strike price was at or above a stated amount on the exercise date. Third, the net premium paid to enter the option contracts is a mere 1.75% of the actual loss claimed. Fourth, any potential profit realized would be further reduced by significant up - front transaction costs. The fees paid to the promoter were 5% for a capital loss or 6% for any ordinary loss desired. Fifth, the only true profit potential comes from the additional hedge fund investment that represents a distinct investment separate from the foreign currency scheme. This "real" investment, which was a prerequisite to obtaining the desired loss, provides the trappings of legitimacy and creates the illusion of profit when aggregated with the tax shelter investment. These facts persuasively demonstrate the lack of any realistic potential for pre-tax profit from the foreign currency strategy.
The transaction also fails the subjective economic substance prong. Typically, the taxpayer has significant taxable income (either capital gain income or ordinary income) unrelated to the transaction. Through participation in this transaction, the taxpayer is able to choose the character and amount of the loss needed to offset the unrelated income. The close connection between the taxable income being sheltered and the claimed loss suggests that the taxpayer did not enter into this transaction for a business purpose. As the Tenth Circuit has recognized, "correlation of losses to tax needs coupled with a general indifference to, or absence of, economic profits may reflect a lack of economic substance." Keeler v. Commissioner , 243 F.3d 1212, 1218 (10th Cir. 2001), citing Freytag v. Commissioner , 89 T. C. 849, 877-878 (1987). Here, the taxpayer does not have a substantial non-tax purpose for entering into the structured transaction other than the creation of an artificial tax loss.
If the revenue agent, after consultation with Financial Products specialist and/or economist, determines that it is appropriate to assert economic substance with respect to a specific transaction, consideration must be given to possible appellate venue. As discussed herein, various circuits apply different standards in determining whether a transaction lacks economic substance. Prior to asserting economic substance, the examiner should consult with local Counsel to determine the appropriate standard in their jurisdiction.
In cases where a taxpayer who invested in the transaction is unable to establish that (1) the transaction changes in a meaningful way (apart from Federal income tax consequences) the taxpayer's economic position and (2) that the taxpayer has a substantial non-tax purposes for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose the tax benefits, fees or expenses, related thereto, may be disallowed.
6. The taxpayer is not entitled to an ordinary loss under I. R.C. §988.
I. R.C . §§985-989, which were enacted as part of the Tax Reform Act of 1986, set forth a comprehensive set of rules for the treatment of foreign currency transactions. In general, I. R.C. §988(a)(1)(A) provides that foreign currency gain or loss attributable to an I. R.C. §988 transaction is computed separately and treated as ordinary income or loss. The I. R.C. §988 foreign currency transaction rules generally apply to forward contracts, futures contracts, options contracts and similar financial instruments.
The legislative history of I. R.C. §§985-989 suggests a consistent concern about tax motivated transactions. The Senate Finance Committee Report accompanying the Tax Reform Act of 1986 stated that one of the two reasons I. R.C. §§985-989 were enacted was prior law provided opportunities for tax motivated transactions. S. Rep. No. 313., 99th Cong., 2d Sess. 450 (1986). Accordingly, in enacting I. R.C. §§985-989, Congress granted broad authority for the Service to promulgate regulations "as may be necessary or appropriate to carry out the purposes of [I. R.C. §§985-989]. . . ." I. R.C. §989(c). The legislative history to the TAMRA, in discussing the law prior to the enactment of TAMRA, stated that "[t]he Secretary has general authority to provide the regulations necessary or appropriate to carry out the purposes of new subpart J. For example, the Secretary may prescribe regulations appropriately recharacterizing transactions to harmonize the general realization and recognition provisions of the Code with the policies of §988." H. R. Rep. No. 795, 100th Cong., 2d Sess. 296 (1988); S. Rep. No. 445, 100th Cong., 2d Sess. 311 (1988) (containing identical language).
In response to Congressional concern about tax motivated transactions, the Service, under the authority of I. R.C. §989(c), promulgated Treas. Reg. §1.988-2(f) and Treas. Reg. §1.988-1(a)(11). Treas. Reg. §1.988-2(f) states that if the substance of a transaction differs from its form, the Commissioner may recharacterize the timing, source, and character of gains or losses with respect to the transaction in accordance with the substance of the transaction. Treas. Reg. §1.988-1(a)(11) states, in relevant part, that the Commissioner may exclude a transaction or series of transactions which in form is an I. R.C. §988 transaction from the provisions of I. R.C. §988 if the substance of the transaction, or series of transactions indicates that it is not properly considered an I. R.C. §988 transaction.
In this case, the transaction at issue may be recharacterized in accordance with its substance so that the taxpayer is required to take i nto account gain as well as the economically corresponding loss under Treas. Reg. §1.988-2(f). For purposes of I. R.C. §988, the Service may adjust the timing of the transaction at issue consistently with its substance and require the taxpayer to recognize gain upon the transfer of the minor contract to the charity on the date of such transfer. The taxpayer's ordinary loss as reported on its return does not reflect the substance of the transaction because the Investor is not economically exposed to fluctuations in the values of the foreign currency positions. The claimed loss is not the result of exposure to exchange rate fluctuations, but rather of differences in timing of recognition of economically offsetting gain and loss positions in an engineered transaction. Accordingly, under Treas. Reg. §1.988-2(f), the taxpayer is required to take both gain and loss into account consistently.
Alternatively, the loss may be excluded from I. R.C. §988 under Treas. Reg. §1.988-1(a)(11) because the reported loss is due to the different reporting methods of the major and minor contracts and does not reflect changes in foreign currency exchange rates. Excluding the transaction from the provisions of I. R.C. §988 under this alternative approach, however, would result in capital loss treatment. Barnes Group v. United States , 697 F. Supp 591 (D. Conn. 1988).
7. The 20 percent accuracy-related penalty under I. R.C. §6662 should be asserted against a taxpayer entering into this transaction unless the taxpayer is able to establish reasonable cause and good faith under I. R.C. §6664(c)(1) and applicable regulations.
I. R.C . §6662 4 imposes an accuracy-related penalty in an amount equal to 20 percent of the portion of an underpayment attributable to, among other things: (1) negligence or disregard of rules or regulations and (2) any substantial understatement of income tax. Treas. Reg. §1.6662- 2(c) provides that there is no stacking of the accuracy-related penalty components. Thus, the maximum accuracy-related penalty imposed on any portion of an underpayment is 20 percent (40 percent for gross valuation misstatements), even if that portion of the underpayment is attributable to more than one type of misconduct. See D. H.L. Corp. v. Commissioner , T. C. Memo. 1998-461, aff'd in part and rev'd on other grounds , remanded by 285 F.3d 1210 (9th Cir. 2002).
In order to facilitate the examiner's review of the relevant facts and circumstances associated with application of the I. R.C. §6662 penalty, this paper first provides a general overview of the law associated with the penalty where there is (a) negligence or disregard of rules or regulations and (b) any substantial understatement of income tax. After the general overview, some more practical suggestions are offered based on the information that has been reviewed to date – including the above - referenced shelter promotion materials and Shelter Memorandum. Much of the focus in that later discussion is on substantial understatement.
Negligence or Disregard of Rules or Regulations.
Negligence under I. R.C. §6662 includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code or to exercise ordinary and reasonable care in the preparation of a tax return. See I. R.C. §6662(c) and Treas. Reg. §1.6662-3(b)(1). Negligence also includes the failure to do what a reasonable and ordinarily prudent person would do under the same circumstances. See Marcello v. Commissioner , 380 F.2d 499, 506 (5th Cir. 1967), aff'g 43 T. C. 168 (1964); Neely v. Commissioner , 85 T. C. 934, 947 (1985). Treas. Reg. §1.6662-3(b)(1)(ii) provides that negligence is strongly indicated where a taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction, credit or exclusion on a return that would seem to a reasonable and prudent person to be "too good to be true" under the circumstances. A return position that has a reasonable basis as defined in Treas. Reg. §1.6662-3(b)(3) is not attributable to negligence. Treas. Reg. §1.6662-3(b)(1).
"Disregard of rules and regulations" includes any careless, reckless, or intentional disregard of rules and regulations. A disregard of rules or regulations is "careless" if the taxpayer does not exercise reasonable diligence in determining the correctness of a position taken on its return that is contrary to the rule or regulation. A disregard is "reckless" if the taxpayer makes little or no effort to determine whether a rule or regulation exists, under circumstances demonstrating a substantial deviation from the standard of conduct observed by a reasonable person. Additionally, a disregard of the rules and regulations is "intentional" where the taxpayer has knowledge of the rule or regulation that it disregards. Treas. Reg. §1.6662-3(b)(2).
The term "rules and regulations" includes the provisions of the Internal Revenue Code, temporary or final treasury regulations, and revenue rulings or notices (other than notices of proposed rulemaking) issued by the Internal Revenue Service and published in the Internal Revenue Bulletin. Treas. Reg. §1.6662-3(b)(2). Therefore, if the facts indicate that a taxpayer took a return position contrary to any published notice or revenue ruling, the taxpayer may be subject to the accuracy-related penalty for an underpayment attributable to disregard of rules and regulations, if the return position was taken subsequent to the issuance of the notice or revenue ruling.
The accuracy-related penalty for disregard of rules and regulations will not be imposed on any portion of underpayment due to a position contrary to rules and regulations if: (1) the position is disclosed on a properly completed Form 8275 or Form 8275-R (the latter is used for a position contrary to regulations) and (2) in the case of a position contrary to a regulation, the position represents a good faith challenge to the validity of a regulation. 5 Treas. Reg. §1.6662-3(c). This adequate disclosure exception applies only if the taxpayer has a reasonable basis for the position and keeps adequate records to substantiate items correctly. Treas. Reg. §1.6662-3(c)(1). Moreover, a taxpayer who takes a position contrary to a revenue ruling or a notice has not disregarded the ruling or notice if the contrary position has a realistic possibility of being sustained on its merits. Treas. Reg. §1.6662-3(b)(2).
The taxpayer has the ultimate burden of overcoming the presumption that the Service's determination of negligence is correct. Marcello v. Commissioner , 380 F.2d 499, 507 (5th Cir. 1967). With respect to examinations commencing after July 22, 1998, however, the Service must first meet the burden of production with respect to negligence. I. R.C. §7491(c); Higbee v. Commissioner , 116 T. C. 438, 446 (2002).
Substantial Understatement.
A substantial understatement of income tax exists for a taxable year if the amount of the understatement exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000 ($10,000 for a corporation, other than an S corporation or a personal holding company). I. R.C. §6662(d)(1). Specific rules apply to the calculation of the understatement when any portion of the understatement arises from an item attributable to a tax shelter. For purposes of I. R.C. §6662(d)(2)(C), a tax shelter is a partnership or other entity, an investment plan or arrangement, or other plan or arrangement where a significant purpose of such partnership, entity, plan or arrangement is the avoidance or evasion of federal income tax. I. R.C. §6662(d)(2)(C)(iii). Because a significant purpose of the Notice 2003-81 transaction is tax avoidance, it is a tax shelter pursuant to I. R.C. §6662(d)(2)(C). Different rules, however, apply depending upon whether the taxpayer is a corporation or an individual or entity other than a corporation.
In the case of any item of a taxpayer other than a corporation, which is attributable to a tax shelter, understatements are generally reduced by the portion of the understatement attributable to: (1) the tax treatment of items for which there was substantial autho rity for such treatment, and (2) the taxpayer reasonably believed that the tax treatment of the item was more likely than not the proper treatment. I. R.C. §6662(d)(2)(C)(i). 6 The substantial authority standard is an objective standard involving an analysis of the law and application of the law to relevant facts. Treas. Reg. §1.6662-4(d)(1). Here, there was no substantial authority for the tax treatment of this transaction. A taxpayer is considered to have reasonably believed that the tax treatment of an item is more likely than not the proper tax treatment if (1) the taxpayer analyzes the pertinent facts and authorities, and based on that analysis reasonably concludes, in good faith, that there is a greater than 50% likelihood that the tax treatment of the item will be upheld if the Service challenges it, or (2) the taxpayer reasonably relies, in good faith, on the opinion of a professional tax advisor, which clearly states (based on the advisor's analysis of the pertinent facts and authorities) that the advisor concludes there is a greater than 50% likelihood the tax treatment of the item will be upheld if the Service challenges it. Treas. Reg. §1.6662-4(g)(4). However, a taxpayer cannot claim to have reasonably relied in good faith on the opinion of a professional tax advisor if the requirements of Treas. Reg. §1.6664-4(c)(1) are not met. Treas. Reg. §1.6662-4(g)(4)(ii). (As a practical matter, the requirement that the opinion take into account the particular motivations and circumstances of the taxpayer makes reliance on a "canned" opinion inherently questionable.) This is discussed further under "Reasonable Cause Exception" below.
If the item is attributable to a tax shelter and the taxpayer is a corporation, the understatement cannot be reduced. 7 I. R.C. §6662(d)(2)(C)(ii). Therefore, if a corporate taxpayer has a substantial understatement that is attributable to a tax shelter item, the accuracy related penalty applies to the underpayment arising from the understatement unless the reasonable cause and good faith exception applies.
Reasonable Cause Exception.
I. R.C . §6664(c) provides an exception, applicable to all types of taxpayers, to the imposition of any accuracy-related penalty if the taxpayer shows that there was reasonable cause and the taxpayer acted in good faith. Special rules apply to items of a corporation attributable to a tax shelter resulting in a substantial understatement.
The determination of whether the taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all relevant facts and circumstances. See Treas. Reg. §1.6664-4(b)(1) and Treas. Reg. §1.6664-4(f)(1). All relevant facts, including the nature of the tax investment, the complexity of the tax issues, issues of independence of a tax advisor, the competence of a tax advisor, the.
sophistication of the taxpayer, and the quality of an opinion, must be developed to determine whether the taxpayer was reasonable and acted in good faith.
Generally, the most important factor in determining whether the taxpayer has reasonable cause and acted in good faith is the extent of the taxpayer's effort to assess the proper tax liability. See Treas. Reg. §1.6664-4(b)(1); see also Larson v. Commissioner , T. C. Memo. 2002-295; Estate of Simplot v. Commissioner , 112 T. C. 130, 183 (1999) (citing Mandelbaum v. Commissioner , T. C. Memo. 1995-255), rev'd on other grounds , 249 F.3d 1191 (9th Cir. 2001). For example, reliance on erroneous information reported on an information return indicates reasonable cause and good faith, provided that the taxpayer did not know or have reason to know that the information was incorrect. Similarly, an isolated computational or transcription error is not inconsistent with reasonable cause and good faith. Treas. Reg. §1.6664-4(b)(1).
Circumstances that may suggest reasonable cause and good faith include an honest misunderstanding of fact or law that is reasonable in light of the facts, including the experience, knowledge, sophistication and education of the taxpayer. Treas. Reg. §1.6664-4(b)(1). The taxpayer's mental and physical condition, as well as sophistication with respect to the tax laws, at the time the return was filed, are relevant in deciding whether the taxpayer acted with reasonable cause. See Kees v. Commissioner , T. C. Memo. 1999-41. If the taxpayer is misguided, unsophisticated in tax law, and acts in good faith, a penalty is not warranted. See Collins v. Commissioner , 857 F.2d 1383, 1386 (9th Cir. 1988); cf. Spears v. Commissioner, T. C. Memo. 1996-341, aff'd, 98-1 USTC ¶ 50,108 (2d Cir. 1997)[Court was unconvinced by the claim of highly sophisticated, able, and successful investors that they acted reasonably in failing to inquire about their investment and simply relying on offering circulars and accountant, despite warnings in offering materials and explanations by accountant about limitations of accountant's investigation].
Reliance upon a tax opinion provided by a professional tax advisor may serve as a basis for the reasonable cause and good faith exception to the accuracy-related penalty. The reliance, however, must be objectively reasonable, as discussed more fully below. For example, the taxpayer must supply the professional with all the necessary information to assess the tax matter. The advice also must be based upon all pertinent facts and circumstances and the law as it relates to those facts and circumstances.
The advice must not be based on unreasonable factual or legal assumptions (including assumptions as to future events) and must not unreasonably rely on the representations, statements, findings, or agreements of the taxpayer or any other person. For example, the advice must not be based upon a representation or assumption which the taxpayer knows, or has reason to know, is unlikely to be true, such as an inaccurate representation or assumption as to the taxpayer's purposes for entering into a transaction or for structuring a transaction in a particular manner. See Treas. Reg. §1.6664-4(c)(1)(ii).
In Long Term Capital Holdings v. United States , 330 F. Supp.2d 122 (D. Conn. 2004), the court concluded that a legal opinion did not provide a taxpayer with reasonable cause where (1) the taxpayer did not receive the written opinion prior to filing its tax return, and the record did not establish the taxpayer's receipt of an earlier oral opinion upon which it would have been reasonable to rely; (2) the opinion was based upon unreasonable assumptions; (3) the opinion did not adequately analyze the applicable law; and (4) the taxpayer's partners did not adequately review the opinion to determine whether it would be reasonable to rely on it. In addition, the court concluded that the taxpayer's lack of good faith was evidenced by its decision to attempt to conceal the losses reported from the transaction by netting them against gains on its return.
Where a tax benefit depends on nontax factors, the taxpayer has a duty to investigate the underlying factors rather than simply relying on statements of another person, such as a promoter. See Novinger v. Commissioner , T. C. Memo. 1991-289. Further, if the tax advisor is not versed in these nontax matters, mere reliance on the tax advisor does not suffice. See Addington v. United States , 205 F.3d 54, 58 (2d Cir. 2000); Collins v. Commissioner , 857 F.2d 1383, 1386 (9th Cir. 1988) Freytag v. Commissioner , 89 T. C. 849, 888 (1987), aff'd,904 F.2d 1011 (5th Cir. 1990). Although a professional tax advisor's lack of independence is not alone a basis for rejecting a taxpayer's claim of reasonable cause and good faith, the fact that a taxpayer knew or should have known of the advisor's lack of independence is strong evidence that the taxpayer may not have relied in good faith upon the advisor's opinion. See Neonatology Associates, P. A. v. Commissioner , 115 T. C. 43, 98 (2001), aff'd 299 F.3d 221 (3rd Cir. 2002) ["Reliance may be unreasonable when it is placed upon insiders, promoters, or their offering materials, or when the person relied upon has an inherent conflict of interest that the taxpayer knew or should have known about"]; Goldman v. Commissioner , 39 F.3d 402, 408 (2d Cir. 1994) aff'g T. C. Memo. 1993-480 ["Appellants cannot reasonably rely for professional advice on someone they know to be burdened with an inherent conflict of interest"]; Marine v. Commissioner , 92 T. C. 958, 992-93 (1989), aff'd without published opinion, 921 F.2d 280 (9th Cir. 1991). Such reliance is especially unreasonable when the advice would seem to a reasonable person to be "too good to be true." Pasternak v. Commissioner , 990 F.2d 893, 903 (6th Cir. 1993), aff'g Donahue v. Commissioner , T. C. Memo. 1991-181; Gale v. Commissioner , T. C. Memo. 2002-54; Elliot v. Commissioner , 90 T. C. 960, 974 (1988), aff'd without published opinion , 899 F.2d 18 (9th Cir. 1990); Treas. Reg. §1.6662-3(b)(2).
Similarly, the fact that a taxpayer consulted an independent tax advisor is not, standing alone, conclusive evidence of reasonable cause and good faith if additional facts suggest that the advice is not dependable. Edwards v. Commissioner , T. C. Memo. 2002-169; Spears v. Commissioner , T. C. Memo. 1996-341, aff'd, 98-1 USTC ¶ 50,108 (2d Cir. 1997). For example, a taxpayer may not rely on an independent tax adviser if the taxpayer knew or should have known that the tax adviser lacked sufficient expertise, the taxpayer did not provide the advisor with all necessary information, or the information the advisor was provided was not accurate." Baldwin v. Commissioner , T. C. Memo. 2002- 162; Spears v. Commissioner , T. C. Memo. 1996-341, aff'd, 98-1 USTC ¶ 50,108 (2d Cir. 1997).
Observations Regarding Application of Penalty to This Shelter.
When it appears that imposing the accuracy-related penalty is warranted, the examiner needs to carefully evaluate the application of the penalty for each taxpayer that is audited. This review is made somewhat easier by the fact that taxpayers must satisfy more stringent standards to avoid application of the penalty where the substantial understatement is in connection with a tax shelter transaction. From a practical standpoint, it will be critical for the examiner to focus upon whether the taxpayer based its return position on a more likely than not legal opinion of a professional tax advisor that considered all pertinent facts and lines of legal authority. Based on the review of the limited materials gathered to date in connection with this shelter transaction, it may be quite difficult for taxpayers to show that they satisfied that standard.
As an initial matter, the examiner should determine whether the taxpayer obtained or relied upon a signed and dated legal opinion that unambiguously concludes that the taxpayer's return positions were more likely than not to be sustained if challenged. If the taxpayer has not reasonably relied on such an opinion, then the accuracy-related penalty should be asserted.
Moreover, while all facts would still have to be considered, the accuracy-related penalty should also apply if the taxpayer simply relied on a "canned" legal opinion that does not address that taxpayer's particular circumstances. Almost by definition, such a "canned opinion could not be reasonably relied upon because it would not address the taxpayer's particular motivations and other pertinent circumstances.
Even if the taxpayer could have reasonably relied on a "canned" legal opinion or one that is directed to the taxpayer, it will be necessary to evaluate whether the opinion took into account all pertinent facts and lines of legal authority. If the draft Shelter Memorandum is a good barometer of the quality of the opinions, if any, provided to taxpayers, the examiner may find that highly pertinent facts were overlooked or misstated. For instance, it is plainly troubling that the draft Shelter Memorandum reached its conclusions regarding section 1092 by assuming that the assigned foreign currency options were not substantially offsetting positions even though separate promotional documents clearly tout the positions as being almost completely offsetting. Moreover, the legal memorandum virtually ignores all discussion of the economics and legal effects of the assignments.
In addition, it will be critical to examine whether the legal opinion addressed all relevant lines of legal authority. As a guide, the examiner should determine if each of the legal issues raised in this CIP were meaningfully considered. The draft Shelter Memorandum was clearly deficient in that regard. For instance, the legal memorandum failed to consider any authority that addresses the tax accounting for options and failed to consider whether the form of assignment caused gain or loss to be recognized under the open transaction doctrine. Though section 988 was considered, the draft memorandum also failed to consider the anti-abuse rules of Treas. Reg. 1.988-2(f).
8. The agent examining the taxable entity should forward all information.
gathered about the involvement of the charity to the Exempt Organizations Division of TEGE through the process established by the Notice 2003-81 Issue Management Team.
Through IDRs and otherwise, the agent examining a taxable entity that entered into one of these transactions will obtain information about the involvement of the charity. In all cases, the agent should forward that information to the Exempt Organizations Division of TEGE through the process established by the Notice 2003-81 Issue Management Team. Examiners should refer to the Notice 2003-81 toolkit for the most current EO contact information, including contact person, address, phone and fax numbers. Information provided by the examiners to Exempt Organizations will be helpful in alerting Examination and Determination Agents so they may identify issues and take appropriate actions.
Exempt Organizations will need to exercise discretion in determining how to proceed with the information that it receives because the nature of the charity's involvement in these transactions may vary. In some cases, a "charity" may have been created by the promoter or someone affiliated with the promoter specifically to facilitate these transactions. The custom-made charity may purport to engage in appropriate charitable activities, but evidence could show substantial and/or repeated involvement as the accommodation party in the transaction. Other cases may involve charities that are well-established in their appropriate charitable endeavors but that appear as accommodation parties in these or other abusive tax transactions. Their involvement may appear on the books simply as a donation, as a net donation from offsetting options or property, or as part of an investment portfolio.
The Service will apply the full array of enforcement tools to those entities whose focus is on accommodating abusive tax transactions. Playing that role does not further a charitable or other tax-exempt purpose. If this role is apparent in the application process for exemption, the Service will not recognize the entity as exempt. If the Service discovers this abusive behavior after having already recognized the entity as exempt, the Service will move to revoke the entity's exemption, possibly back to its inception.
Where the Service learns that an otherwise compliant charity has become involved in an abusive transaction as an accommodating party, whether booked as a donation, fee, investment, or otherwise, the charity may expect to be contacted by the Service. The charity may be requested to provide the details of its involvement, information about the transaction and other parties, etc. Depending on the circumstances, this contact may be made by the Exempt Organizations Division as a compliance check with respect to the Form 990 or other return, or as part of an inquiry into the charity's own taxation and exemption status or other associated tax issues. In the alternative, it may arise as a third-party request for information relating to the examination of a promoter or taxable party. Prior to any contact being made to charity, coordination must first be made with the Exempt Organizations Division. While these transactions, at a minimum, raise questions about an organization's governance, if significant levels or types of involvement come to light, the Service will take the tax-exempt entity's involvement into account in determining whether to continue to recognize the entity's exemption or to apply an appropriate tax.
_____FOOTNOTES_____.
Part III - Administrative, Procedural and Miscellaneous.
Tax Avoidance Using Offsetting Foreign Currency Option Contracts.
The Internal Revenue Service and the Treasury Department are aware of a type of transaction, described below, in which a taxpayer claims a loss upon the assignment of a section 1256 contract to a charity but fails to report the recognition of gain when the taxpayer's obligation under an offsetting non-section 1256 contract terminates. This notice alerts taxpayers and their representatives that these transactions are tax avoidance transactions and identifies these transactions, and those that are substantially similar to these transactions, as listed transactions for purposes of §1.6011-4(b)(2) of the Income Tax Regulations and §§301.6111-2(b)(2) and 301.6112-1(b)(2) of the Procedure and Administration Regulations. This notice also alerts parties involved with these transactions of certain responsibilities that may arise from their involvement with these transactions.
A taxpayer pays premiums to purchase a call option and a put option (the purchased options) on a foreign currency. The following sentence is an erroneous conclusion of law. The currency is one in which positions are traded through regulated futures contracts, and the purchased options, therefore, are foreign currency contracts within the meaning of section 1256(g)(2)(A) of the Internal Revenue Code and section 1256 contracts within the meaning of section 1256(b). This sentence should have stated: The taxpayer takes the position that the purchased options are foreign currency contracts within the meaning of §1256(g)(2)(A) of the Internal Revenue Code and §1256 contracts within the meaning of §1256(b). The purchased options are reasonably expected to move inversely in value to one another over a relevant range, thus ensuring that, as the value of the underlying foreign currency changes, the taxpayer will hold a loss position in one of the two section 1256 contracts. The taxpayer also receives premiums for writing a call option and a put option (the written options) on a different foreign currency in which positions are not traded through regulated futures contracts. Thus, the written options are not foreign currency contracts within the meaning of section 1256(g)(2)(A), nor are they section 1256 contracts within the meaning of section 1256(b). The written options are reasonably expected to move inversely in value to one another over a relevant range, thus ensuring that, as the value of the underlying foreign currency changes, the taxpayer will hold a gain position in one of the two non-section 1256 contracts.
The values of the two currencies underlying the purchased and written options (i) historically have demonstrated a very high positive correlation with one another, or (ii) officially have been linked to one another, such as through the European Exchange Rate Mechanism (ERM II). Thus, as the currencies change in value, the taxpayer reasonably expects to have the following potential gains and losses in substantially offsetting positions: (1) a loss in a purchased option and a gain in a written option; and (2) a gain in a purchased option and a loss in a written option. At any time, the taxpayer's loss in the purchased option position that has declined in value may be more or less than the taxpayer's gain in the offsetting written option position that has appreciated in value. Similarly, the taxpayer's gain in the remaining purchased option position may be more or less than the taxpayer's loss in the remaining written option position. A material pre-tax profit or rate of return, or both, on the transaction is possible but unlikely.
The taxpayer assigns to a charity the purchased option that has a loss. The charity also assumes the taxpayer's obligation under the offsetting written option that has a gain. As with all written options, the amount of gain on the option is limited to the premium received for the option. In the same tax year, the taxpayer may dispose of the remaining purchased option and offsetting written option.
Because the purchased option assigned to the charity is a section 1256 contract, the taxpayer relies on section 1256(c) and Greene v. United States , 79 F.3d 1348 (2d Cir. 1996), to mark to market the purchased option when the option is assigned to the charity and to recognize a loss at that time. In contrast, because the assumed written option is not a section 1256 contract, the taxpayer claims not to recognize gain attributable to the option premium. Specifically, the taxpayer claims that the charity's assumption of the option obligation does not cause the taxpayer to recognize gain and that the taxpayer also does not recognize gain either at the time the option expires or terminates or at any other time.
Rev. Rul. 58-234, 1958-1 C. B. 279, clarified by Rev. Rul. 68-151, 1968-1 C. B. 363, holds that an option writer does not recognize income or gain with respect to a premium received for writing an option until the option is terminated, without exercise, or otherwise. Accord Rev. Rul. 78-182, 1978-1 C. B. 265; Koch v. Commissioner , 67 T. C. 71 (1976), acq . 1980-2 C. B. 1. Rev. Rul. 58-234 explains that this is the treatment for the option writer because the option writer assumes a burdensome and continuing obligation, and the transaction therefore stays open without any ascertainable income or gain until the writer's obligation is finally terminated. When the option writer's obligation terminates, the transaction closes, and the option writer must recognize any income or gain attributable to the prior receipt of the option premium.
In some cases, the option writer's obligation under the option contract may terminate on the charity's assumption of the written option obligation. In other cases, the writer will have a continuing obligation because the writer may be called upon to perform if the charity fails to perform or to reimburse the charity for any losses or expenses it may incur if called upon to perform. If an assumption terminates the option writer's obligation under the option contract, the option writer must recognize gain when the option obligation is assumed. If the assumption does not terminate the option writer's obligation under the option contract, the option writer must recognize the premium when the option writer's obligation under the option contract terminates (other than through an exercise of the option against, and performance by, the option writer).
These general principles remain applicable even if the assumption of the option writer's obligation is part of what the taxpayer claims is a donative transaction. Cf . Diedrich v. Commissioner , 457 U. S. 191 (1982) (noting that if a donee pays a gift tax obligation arising from a donative transfer, the donative nature of the transaction does not preclude income recognition by the donor on the obligation assumed). Here, the taxpayer has made a transfer to the charity of the purchased option, and the charity has assumed the burden of the written option. No aspect of the taxpayer's transfer or the charity's assumption (or their combination) relieves the taxpayer from its duty under the Code to account for the gain attributable to the premium originally received by the taxpayer for assuming the burden of writing the option. See Lucas v. Earl , 281 U. S. 111 (1930) (holding that a taxpayer may not avoid inclusion of future earned income by making a gratuitous transfer of the right to receive the income).
Finally, if the taxpayer has any unrecognized gain on the written option at the end of the year in which the assumption occurs (e. g., the assumption did not terminate the option writer's obligation under the option contract), the mark-to-market loss on the offsetting contributed section 1256 contract will be deferred under section 1092.
Transactions that are the same as, or substantially similar to, the transactions described in this notice are identified as "listed transactions" for purposes of §§1.6011-4(b)(2), 301.6111-2(b)(2) and 301.6112-1(b)(2) effective December 4, 2003, the date this notice was released to the public. Variations on these transactions may include positions in other section 1256 and non-section 1256 contracts. Independent of their classification as "listed transactions" for purposes of §§1.6011-4(b)(2), 301.6111-2(b)(2), and 301.6112-1(b)(2), transactions that are the same as, or substantially similar to, the transaction described in this notice may already be subject to the disclosure requirements of section 6011 (§1.6011-4), the tax shelter registration requirements of section 6111 (§§301.6111-1T, 301.6111-2), or the list maintenance requirements of section 6112 ( §301.6112-1). Persons who are required to register these tax shelters under section 6111 but have failed to do so may be subject to the penalty under section 6707(a). Persons who are required to maintain lists of investors under section 6112 but have failed to do so (or who fail to provide those lists when requested by the Service) may be subject to the penalty under section 6708(a). In addition, the Service may impose penalties on parties involved in these transactions or substantially similar transactions, including the accuracy-related penalty under §6662.
The Service and the Treasury recognize that some taxpayers may have filed tax returns taking the position that they were entitled to the purported tax benefits of the type of transaction described in this notice. These taxpayers should consult with a tax advisor to ensure that their transactions are disclosed properly and to take appropriate corrective action.
The principal author of this notice is Clay Littlefield of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this notice, contact Mr. Littlefield at (202) 622-3920 (not a toll-free call).
Part III – Administrative, Procedural, and Miscellaneous.
Modification of Notice 2003-81.
This Notice modifies and supplements Notice 2003-81, 2003-2 C. B. 1223, by correcting a statement in the "Facts" portion of Notice 2003-81.
On December 4, 2003, the Internal Revenue Service ("Service") and the Treasury Department ("Treasury") published Notice 2003-81, which described a tax avoidance transaction involving offsetting foreign currency options and identified such transaction and those substantially similar to it as listed transactions for purposes of §1.6011-4(b)(2) of the Income Tax Regulations and §§301.6111-2(b)(2) and 301.6112-1(b)(2) of the Procedure and Administration Regulations.
In the transaction described in Notice 2003-81, a taxpayer pays premiums to purchase a call option and a put option (the purchased options) on a foreign currency in which positions are traded through regulated futures contracts. The purchased options are reasonably expected to move inversely in value to one another over a relevant range, thus ensuring that, as the value of the underlying foreign currency changes, the taxpayer will hold a loss position in one of the two purchased options. The taxpayer also receives premiums for writing a call option and a put option (the written options) on a different foreign currency in which positions are not traded through regulated futures contracts. The taxpayer takes the position that the written options are neither foreign currency contracts within the meaning of §1256(g)(2)(A) nor §1256 contracts within the meaning of §1256(b). The written options are reasonably expected to move inversely in value to one another over a relevant range, thus ensuring that, as the value of the underlying foreign currency changes, the taxpayer will hold a gain position in one of the two written options.
The values of the two currencies underlying the purchased and written options (i) historically have demonstrated a very high positive correlation with one another, or (ii) officially have been linked to one another, such as through the European Exchange Rate Mechanism (ERM II). Thus, as the currencies change in value, the taxpayer reasonably expects to have the following potential gains and losses in substantially offsetting positions: (1) a loss in a purchased option and a gain in a written option; and (2) a gain in a purchased option and a loss in a written option. At any time, the taxpayer's loss in the purchased option position that has declined in value may be more or less than the taxpayer's gain in the offsetting written option position that has appreciated in value. Similarly, the taxpayer's gain in the remaining purchased option position may be more or less than the taxpayer's loss in the remaining written option position. A material pre-tax profit or rate of return, or both, on the transaction is possible but unlikely.
The taxpayer assigns to a charity the purchased option that has a loss. The charity also assumes the taxpayer's obligation under the offsetting written option that has a gain. The premium received on that written option is not assigned but is retained by the taxpayer. As with all written options, the amount of gain on the option is limited to the premium received for the option. In the same tax year, the taxpayer may dispose of the remaining purchased option and offsetting written option.
Because the taxpayer takes the position that the purchased option assigned to the charity is a §1256 contract, the taxpayer relies on §1256(c) and Greene v. United States, 79 F.3d 1348 (2d Cir. 1996) to mark to market the purchased option when the option is assigned to the charity and to recognize a loss at that time. In contrast, because the taxpayer takes the position that the assumed written option is not a §1256 contract, the taxpayer claims not to recognize gain attributable to the option premium. Specifically, the taxpayer claims that the charity's assumption of the option obligation does not cause the taxpayer to recognize gain and that the taxpayer also does not recognize gain either at the time the option expires or terminates or at any other time.
Although as a general matter the "Facts" portion of Notice 2003-81 correctly describes the transaction at issue, it includes an erroneous conclusion of law. The second sentence in the "Facts" portion of Notice 2003-81 states: "The currency is one in which positions are traded through regulated futures contracts, and the purchased options, therefore, are foreign currency contracts within the meaning of §1256(g)(2)(A) of the Internal Revenue Code and §1256 contracts within the meaning of §1256(b)."
This sentence should have stated "The taxpayer takes the position that the purchased options are foreign currency contracts within the meaning of §1256(g)(2)(A) of the Internal Revenue Code and §1256 contracts within the meaning of §1256(b)." The Service and Treasury do not believe that foreign currency options, whether or not the underlying currency is one in which positions are traded through regulated futures contracts, are foreign currency contracts as defined in §1256(g)(2), and intend to challenge any such characterization by taxpayers.
Section 1256(g)(2)(A) defines a foreign currency contract, in part, as a contract that requires delivery of, or the settlement of which depends on the value of, certain foreign currencies. The original statutory definition, however, did not allow for cash settlement and required actual delivery of the underlying foreign currency in all circumstances. Options, by their nature, only require delivery if the option is exercised. Section 102 of the Tax Reform Act of 1984, P. L. 98-369, 1984-3 (Vol. 1) C. B. 128, added the clause "or the settlement of which depends on the value of." There is no indication, however, that Congress intended by this addition to extend the definition of "foreign currency contract" to foreign currency options. That conclusion is confirmed by the legislative history to §988(c)(1)(E), enacted by the Technical and Miscellaneous Revenue Act of 1988, P. L. 100-647, 1988-3 C. B. 377-380, which indicates that a foreign currency option is not a foreign currency contract as defined in §1256(g)(2).
Subject to the following, §7805(b) relief is granted to taxpayers that adopted an accounting method in reasonable reliance on Notice 2003-81 to treat over-the-counter foreign currency options as foreign currency contracts as defined in §1256(g)(2). Section 7805(b) relief is not granted with respect to options entered into in transactions that are the same or substantially the same as those described in Notice 2003-81. Further, §7805(b) relief is not granted with respect to options entered into in any transaction identified as a listed transaction for purposes of §§1.6011-4(b)(2), 301.6111-2(b)(2) and 301.6112-1(b)(2).
The principal authors of this notice are Mark E. Erwin of the Office of Associate Chief Counsel (International) and Patrick E. White of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this notice contact Mark E. Erwin at (202) 622-3870 or Patrick E. White at (202) 622-3920 (not a toll free call.
Chief Counsel Advice 201045022.
described in § 1.6011-4(c)(3), in a reportable transaction within the meaning of.
§ 1.6011-4(b) and who is required to file a tax return must file within the time prescribed.
in § 1.6011-4(e) a disclosure statement in the form prescribed by § 1.6011-4(d).
obligations under § 1.6011-4 as a result of claiming losses under § 165.
and Situation 4, described below, are complete under § 1.6011-4(d).

TraderStatus.
Looking for tax deductions?
Short-term trading is fast… exciting… profitable… challenging… and tax deductible!
When you tally up your results each year – do you see the capital gain tax taking away too much from your hard won trading profits? As an active trader do you find that you have too little time at the end of the day to do the necessary tax planning to avoid paying excessive income taxes? What is the real story behind all the talk about the tax benefits from choosing trader status and electing mark to market?
Potential 2018 changes to carried interest: The underlying assets must be held for three years “with respect to certain partnership interests.” This change would result in hedge funds players paying more in taxes on gains since they trade assets more frequently. Private equity – angel investors, who hold their assets over a longer term, would be exempt.
Potential 2018 changes regarding traders in financial instruments: A lower ordinary tax rate may be available for trading as a “specified service activity” for those using a pass-thru entity, but perhaps not for sole-proprietor traders.
Potential 2018 changes: A higher “capital percentage” may be beneficial for certain trades or businesses. Therefore, it may be beneficial to purchase equipment, rather than lease it. When the final tax law is passed and IRS regulations are issued, this will be clearer.
Potential 2018 changes: Recharacterizations between traditional and Roth IRAs, including reversal a Roth conversion, are not allowed after 12/31/17.
Potential 2018 changes: Alimony deduction may be disallowed for those occurring after 12/31/17. Earlier divorces may be modified to have this same rule.
Potential 2018 changes: Any deduction for gambler operating expenses and wagers made will be limited to the amount of gambler winnings (including the 1099 income).
Here at TraderStatus™ we will bring together in one place the information necessary to help you survive unnecessarily high short-term capital gain taxes, self-employment taxes, Affordable Care (Obamacare) taxes, and state and federal income taxes. To accomplish this often a separate trading entity is the answer, but just as often we avoid it as not being cost effective in a particular situation.
Many traders do not yet even realize that they are paying far too much to the Federal Government. Existing, proven and legal procedures, which in many cases can significantly reduce taxes each and every year, are available to anyone qualified to choose to use them and to timely elect to use them.
As we all eventually learn, those low capital gain tax rates of 20% or lower are not available for the daytrader’s lightning fast trading profits. Rather, an individual daytrader’s gains (or losses) are subject to the higher ordinary income tax rates!
Investors and securities traders may incur substantial costs with online fees, commissions, real-time data-feeds, computer equipment and so on. The Internal Revenue Service, on their own, do not treat most taxpayers very fairly when it comes to deducting these expenses. Leaving it up to the IRS publications and instructions, at best, a taxpayer must first qualify to itemize his deductions on Schedule A – making those deductions subject to a 2% of Adjusted Gross Income (AGI) reduction and for high-income taxpayers even some additional limitations.
Whether you call it trader tax status or day trading or you just want to find out more about being a day trader, please take the time to read and understand the information found on our web site as it can be very helpful to you when preparing your taxes and when planning your tax strategies. Every month we hear from taxpayers who found this web site too late or after they already paid someone for a download that contained nothing more than the basic generic one-size-fits-all information. Taxpayers who were ill-advised by normally very competent CPAs and other tax practitioners, but for whom the tricks and traps of Trader Status were unknown to them or misapplied by them.
There are many excellent income tax advisers out there. And a good CPA does not need to know everything. He or she only needs to know how to look up the specific tax issues. And even more importantly – knowing when there is an issue or potential issue and that needs some attention.
Unfortunately the hard facts are that, when it comes to traders in financial instruments or commodities, many tax advisors still have no clue when there is a Trader Status issue to look up, let alone having the practical hands-on experience necessary to be aware of the hidden tricks and traps out there!
1:9.5 if the taxpayer is earning over $1MM (updated for 2015) 1:25 are the odds for individuals earning greater than $200,000. 1:100 for people earning less than $200,000. 1.6MM tax returns are audited annually, out of 150MM Form 1040 returns being filed. 8 out of every 10 audits result in additional taxes being assessed.
The top 1% reported 19% of the country’s AGI, and they paid 37.8% of all federal income tax.
The top 5% reported 34.4% of the country’s AGI, and they paid 58.6% of all federal income tax.
The top 10% reported 45.9% of the country’s AGI, and they paid 69.8% of all federal income tax.
Entities filing Forms 1120 or 1120S or 1065 –
“No-change” rate for audits of Form 1065 49%
“No-change” rate for audits of large 1040 41%
Help is out there for those qualifying taxpayers whom are active enough to file with the IRS as a TraderStatus™Taxpayer. Under Trader Status an electing daytrader may deduct all of his ordinary and necessary expenses. Taxpayers filing with Trader Status do not itemize those expenses on Schedule A (but yes, they may itemize other expenses and may even take the “standard deduction” in addition to all of their “trader status” expense deductions). Since a trader does not “itemize” daytrading expenses these are not subject to the 2% limitation, the 3% limitation, or many of several other restrictions the IRS places on the average investor!
To access the old-school, non-mobile friendly original website, click here.