have substantially the same effect as a trans-
action described in any of the preceding sub-
paragraphs.
‘‘(2) EXCEPTION FOR TRANSACTIONS MARKED
TO MARKET.—The term ‘constructive sale’ shall not
include any transaction if the appreciated financial
position which is part of such transaction is marked
to market under section 475 or 1256.
‘‘(3) EXCEPTION FOR SALES OF NONPUBLICLY
TRADED
PROPERTY.—The term ‘constructive sale’
shall not include any contract for sale of any stock,
debt instrument, or partnership interest which is not
a marketable security (as defined in section 453(f))
if the sale occurs within 1 year after the date such
contract is entered into.
‘‘(4) EXCEPTION
FOR
TRANSACTIONS
WHICH
ARE CLOSED BY YEAR END.—In applying this sec-
tion, there shall be disregarded—
‘‘(A) any appreciated financial position
which is sold or otherwise disposed of during
the taxable year in a transaction in which gain
or loss is recognized, and
‘‘(B) any other transaction (which would
otherwise be treated as a constructive sale) if—
‘‘(i) such transaction is closed before
the end of the taxable year, and
‘‘(ii) in the case of a transaction
which is closed during the last 30 days of
such taxable year, another transaction with
substantially the same effect as the closed
transaction is not entered into during the
31-day period beginning with the date on
which such transaction was closed.
‘‘(5) 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.
‘‘(6) 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 WHICH WAS DEEMED SOLD.—If—
‘‘(A) there is a constructive sale of any ap-
preciated 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 resulting in the construc-
tive sale of such position is open with respect
to the taxpayer 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) SECURITIES TRADERS MAY ELECT MARK TO
MARKET.—Subsection (d) of section 475 (relating to
mark to market accounting method for dealers in securi-
ties) is amended by adding at the end the following new
paragraph:
‘‘(4) SECURITIES TRADERS MAY ELECT MARK
TO MARKET.—In the case of a person engaged in the
trade or business of being an active trader in securi-
ties—
‘‘(A) such person may elect to be treated
as a dealer in securities for purposes of this
section, and
‘‘(B) securities held by such person in con-
nection with such trade or business shall be
treated as not held for investment.
Such an election may be made without the consent
of the Secretary and, if made, shall apply to the tax-
able year for which made and all subsequent taxable
years unless revoked with the consent of the Sec-
retary.’’
(c) 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.’’
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (3), the amendments made by this section
shall apply to—
(A) any constructive sale after the date of
the enactment of this Act, and