The IRS on Nov. 18 issued Announcement 2013-44, 2013-47 I.R.B.
545, which changed the date that Treas. Reg. Section 1.1092(b)-6T
applies to mixed straddles. Originally, the application date was
for all “identified mixed straddles” established after
Aug. 1, 2013. The new date is for identified mixed straddles
established after the date Treas. Reg. Section 1.1092(b)-6T is
finalized. The IRS expects to finalize those regulations by June
30, 2014.
A “mixed straddle” is defined in Treas. Reg. Section
1.1092(b)-5T(e) as a straddle (i) for which all of the positions
are held as capital assets, (ii) for which at least one (but not
all) of the positions is a Section 1256 contract (as defined in
Section 1256(b)), (iii) for which an election under Section 1256(d)
has not been made, and (iv) that is not part of a larger
straddle.
Special rules are provided in Treas. Reg. Sections
1.1092(b)-3T(b)(2)–(7), related to the netting and
determination of character for gain or loss regarding mixed
straddles for which the taxpayer has made an election under Section
1092(b)(2) and Treas. Reg. Section 1.1092(b)-3T(d) (an
“identified mixed straddle”).
Regarding Treas. Reg. Section 1.1092(b)-3T(b)(6), if one or more
positions of an identified mixed straddle were held before that
identified mixed straddle was established, those positions would be
deemed sold for their fair market value as of the close of the last
business day preceding the day that the identified mixed straddle
was established. In addition, Treas. Reg. Section
1.1092(b)-3T(b)(6) provides for an adjustment (through an
adjustment to basis or otherwise) to any subsequent gain or loss
recognized related to such positions.
The IRS issued temporary regulations (T.D. 9627) under Treas. Reg.
Sections 1.1092(b)-3T and 1.1092(b)-6T on Aug. 2, 2013, which
changed the treatment of pre-straddle gain and pre-straddle loss
related to identified mixed straddles.
Specifically, the newly issued Treas. Reg. Section 1.1092(b)-6T provides that pre-straddle gain and loss is taken into account, and has its character determined, at the appropriate time that would apply otherwise under the Internal Revenue Code if the identified mixed straddle was not established. In addition, changes in value of the positions that are a part of the identified mixed straddle are accounted for under Treas. Reg. Section 1.1092(b)-3T.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
