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Do What I Say, Not What I Do: The US Internal Revenue Service Finalizes Changes to the Mixed Straddle Rules

by James R. Barry
Mayer Brown LLP - Chicago Office

George W. Craven
Mayer Brown LLP - Chicago Office

Mark H. Leeds
Mayer Brown LLP - New York Office

July 22, 2014

Previously published on July 21, 2014

In 1981, when Congress enacted the straddle rules preventing selective loss recognition, it directed the IRS to allow taxpayers to recognize built-in gain and loss on mixed straddles. In response, the IRS wrote regulations that permit such gain and loss recognition. The IRS has changed its view and rewrote the regulation to prohibit taxpayers entering into mixed straddles from recognizing built-in losses beginning on August 16, 2014. Other tax rules, however, will require the recognition of built-in gains. All trading enterprises, but the insurance industry in particular, is likely to affected by this change. Taxpayers desiring to take advantage of the current rules must act quickly.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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