‘‘(2) POSITION.—The term ‘position’ means an
interest, including a futures or forward contract,
short sale, or option.
‘‘(3) TREATMENT
OF
LIMITED-TERM
INTER-
ESTS.—Except as provided in regulations, the term
position shall not include any interest that has a
term of 3 years of less.
‘‘(4) POSITIONS AS TO WHICH GAIN OR LOSS IS
OTHERWISE
RECOGNIZED
DURING
THE
TAXABLE
YEAR.—The term position does not include any posi-
tion that—
‘‘(A) is sold or disposed of during the tax-
able year in a transaction in which gain or loss
is recognized, or
‘‘(B) is marked to market under section
475, section 1256, or any other provision.
‘‘(c) CONSTRUCTIVE SALE.—For purposes of this
section—
‘‘(1) IN GENERAL.—A taxpayer shall be treated
as having made a constructive sale of an appreciated
financial position of the taxpayer (or a related per-
son) enters into any of the following transactions
and the transaction has not been closed or termi-
nated within 1 year of the date it was entered into—
‘‘(A) making a short sale of substantially
identical property,
‘‘(B) entering into an offsetting notional
principal contract with respect to substantially
identical property,
‘‘(C) entering into a futures or forward
contract to deliver substantially identical prop-
erty,
‘‘(D) in the case of an appreciated finan-
cial position that is a short sale or a contract
described in subparagraph (B) or (C) with re-
spect to any property, acquiring substantially
identical property, or
‘‘(E) to the extent provided in regulations
having prospective effect, entering into 1 or
more other transactions (or acquiring 1 or more
positions) that have substantially the same ef-
fect as a transaction described in any of the
preceding subparagraphs.
A constructive sale shall be deemed to occur on the
date that is 1 year after the date on which the
transaction described in subparagraphs (A) through
(E) is entered into.
‘‘(2) RELATED PERSON.—A person is related to
another person with respect to a transaction if—
‘‘(A) the relationship is described in sec-
tion 267 or 707(b), and
‘‘(B) such transaction is entered into with
a view toward avoiding the purposes of this sec-
tion.
‘‘(3) SPECIAL
RULE
FOR
DEBT
INSTRU-
MENTS.—For purposes of paragraph (1)(A), posi-
tions in interest rates shall be treated as positions
in property which are substantially identical to debt
instruments.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) FORWARD CONTRACT.—The term ‘forward
contract’ includes a fully or partially prepaid for-
ward contract.
‘‘(2) OFFSETTING NOTIONAL PRINCIPAL CON-
TRACT.—The term ‘offsetting notional principal con-
tract’ means, with respect to any property, an agree-
ment to pay the investment yield (including appre-
ciation) on such property for a specified period in
exchange for the right to be reimbursed for any de-
cline in the value of such property and for other con-
sideration.
‘‘(e) SPECIAL RULES.—
‘‘(1) TREATMENT
OF
SUBSEQUENT
SALE
OF
POSITION.—If—
‘‘(A) a taxpayer (or a related person) en-
ters into a transaction described in subsection
(c)(1) with respect to any appreciated financial
position,
‘‘(B) such position is subsequently sold or
otherwise disposed of, and
‘‘(C) at the time of such sale or disposi-
tion, the transaction described in subsection
(c)(1) remains open with respect to the tax-
payer or any related person,
solely for purposes of determining whether the tax-
payer has entered into a constructive sale of any
other appreciated financial position held by the tax-
payer, the taxpayer shall be treated as entering into
such transaction immediately after such sale or
other disposition.
‘‘(2) CERTAIN TRUST INSTRUMENTS TREATED
AS STOCK.—For purposes of this section, an interest
in a trust which is actively traded (within the mean-
ing of section 1092(d)(1)) shall be treated as stock.
‘‘(3) MULTIPLE POSITIONS IN PROPERTY.—If
there is a constructive sale of a portion of any prop-
erty held by the taxpayer, the determination of the
specific property which is deemed sold shall be made
in the same manner as if the constructive sale were
an actual sale; except that property treated as sold
by reason of a prior constructive sale that remains
open shall be disregarded.
‘‘(f) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part IV of subchapter P of chapter 1 of such Code
is amended by adding at the end the following new item:
‘‘Sec. 1259. Constructive sales treatment for appreciated financial
positions.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to constructive sales after the date
of the enactment of this Act.
Æ