• Difficulty in Every Opportunity: TAM 201142020 Provides Insights on Deemed Exchanges and Hedging
  • November 14, 2011 | Author: Mark H. Leeds
  • Law Firm: Greenberg Traurig, LLP - New York Office
  • When my children were small, I mischievously told them that I studied federal income tax law at Harry Potter’s Hogwarts Academy. To embellish the story, I told them that Santa Claus was in my class. (Why not? In my kids’ eyes, Santa and I are the same age: eternal.) Of course, they challenged both assertions and wondered out loud whether their father was mad. In a recent Internal Revenue Service (IRS) Technical Advice Memorandum (TAM), modified financial instruments undergo deemed exchanges and finds transactions not designated as hedges to be hedges. Things are sometimes not what they seem to be in real life as well as at Hogwarts. This GT Alert describes the trials and tribulations of a commodity producer, likely a gold mining company, that experienced tax, as well as economic, challenges on its derivative transactions.