#### § 1.475-0 Table of contents.

This section lists the major captions in §§ 1.475(a)-3, 1.475(a)-4, 1.475(b)-1, 1.475(b)-2, 1.475(c)-1, 1.475(c)-2, 1.475(d)-1 and 1.475(g)-1.

## §§ 1.475(a)-1—1.475(a)-2 [Reserved]

## § 1.475(a)-3 Acquisition by a dealer of a security with a substituted basis.

(a) Scope.

(b) Rules.

## § 1.475(a)-4 Safe Harbor for Valuation Under Section 475.

(a) Overview.

(1) Purpose.

(2) Dealer business model.

(3) Summary of paragraphs.

(b) Safe harbor.

(1) General rule.

(2) Example. Use of eligible and non-eligible methods.

(3) Scope of the safe harbor.

(c) Eligible taxpayer.

(d) Eligible method.

(1) Sufficient consistency.

(2) General requirements.

(i) Frequency.

(ii) Recognition at the mark.

(iii) Recognition on disposition.

(iv) Fair value standard.

(3) Limitations.

(i) Bid-ask method.

(A) General Rule.

(B) Safe harbor.

(ii) Valuations based on present values of projected cash flows.

(iii) Accounting for costs and risks.

(4) Examples.

(e) Compliance with other rules.

(f) Election.

(1) Making the election.

(2) Duration of the election.

(3) Revocation.

(i) By the taxpayer.

(ii) By the Commissioner.

(4) Re-election.

(g) Eligible positions.

(h) Applicable financial statement.

(1) Definition.

(2) Primary financial statement.

(i) Statement required to be filed with Securities and Exchange Commission (SEC).

(ii) Statement filed with a Federal agency other than the IRS.

(iii) Certified audited financial statement.

(3) Example. Primary financial statement.

(4) Financial statements of equal priority.

(5) Consolidated groups.

(6) Supplement or amendment to a financial statement.

(7) Certified audited financial statement.

(i) [Reserved]

(j) Significant business use.

(1) In general.

(2) Financial statement value.

(3) Management of a business as a dealer.

(4) Significant use.

(k) Retention and production of records.

(1) In general.

(2) Specific requirements.

(i) Reconciliation.

(A) In general.

(B) Values on books and records with supporting schedules.

(C) Consolidation schedules.

(ii) Instructions provided by the Commissioner.

(3) Time for producing records.

(4) Retention period for records.

(5) Agreements with the Commissioner.

(l) [Reserved]

(m) Use of different values.

## § 1.475(b)-1 Scope of exemptions from mark-to-market requirement.

(a) Securities held for investment or not held for sale.

(b) Securities deemed identified as held for investment.

(1) In general.

(2) Relationships.

(i) General rule.

(ii) Attribution.

(iii) Trusts treated as partnerships.

(3) Securities traded on certain established financial markets.

(4) Changes in status.

(i) Onset of prohibition against marking.

(ii) Termination of prohibition against marking.

(iii) Examples.

(c) Securities deemed not held for investment; dealers in notional principal contracts and derivatives.

(d) Special rule for hedges of another member's risk.

(e) Transitional rules.

(1) Stock, partnership, and beneficial ownership interests in certain controlled corporations, partnerships, and trusts before January 23, 1997.

(i) In general.

(ii) Control defined.

(iii) Applicability.

(2) Dealers in notional principal contracts and derivatives acquired before January 23, 1997.

(i) General rule.

(ii) Exception for securities not acquired in dealer capacity.

(iii) Applicability.

## § 1.475(b)-2 Exemptions—identification requirements.

(a) Identification of the basis for exemption.

(b) Time for identifying a security with a substituted basis.

(c) Integrated transactions under § 1.1275-6.

(1) Definitions.

(2) Synthetic debt held by a taxpayer as a result of legging in.

(3) Securities held after legging out.

## § 1.475(b)-3 [Reserved]

## § 1.475(c)-1 Definitions—dealer in securities.

(a) Dealer-customer relationship.

(1) [Reserved]

(2) Transactions described in section 475(c)(1)(B).

(i) In general.

(ii) Examples.

(3) Related parties.

(i) General rule.

(ii) Special rule for members of a consolidated group.

(iii) The intragroup-customer election.

(A) Effect of election.

(B) Making and revoking the election.

(iv) Examples.

(b) Sellers of nonfinancial goods and services.

(1) Purchases and sales of customer paper.

(2) Definition of customer paper.

(3) Exceptions.

(4) Election not to be governed by the exception for sellers of nonfinancial goods or services.

(i) Method of making the election.

(A) Taxable years ending after December 24, 1996.

(B) Taxable years ending on or before December 24, 1996.

(ii) Continued applicability of an election.

(c) Taxpayers that purchase securities from customers but engage in no more than negligible sales of the securities.

(1) Exemption from dealer status.

(i) General rule.

(ii) Election to be treated as a dealer.

(2) Negligible sales.

(3) Special rules for members of a consolidated group.

(i) Intragroup-customer election in effect.

(ii) Intragroup-customer election not in effect.

(4) Special rules.

(5) Example.

(d) Issuance of life insurance products.

## § 1.475(c)-2 Definitions—security.

(a) Items that are not securities.

(b) Synthetic debt that § 1.1275-6(b) treats the taxpayer as holding.

(c) Negative value REMIC residuals acquired before January 4, 1995.

(1) Description.

(2) Special rules applicable to negative value REMIC residuals acquired before January 4, 1995.

## § 1.475(d)-1 Character of gain or loss.

(a) Securities never held in connection with the taxpayer's activities as a dealer in securities.

(b) Ordinary treatment for notional principal contracts and derivatives held by dealers in notional principal contracts and derivatives.

## § 1.475(g)-1 Effective dates.

[T.D. 8700, 61 FR 67719, Dec. 24, 1996, as amended by T.D. 9328, 72 FR 32177, June 12, 2007; T.D. 9849, 84 FR 9235, Mar. 14, 2019]