Source: https://www.law.cornell.edu/uscode/text/26/1258
Timestamp: 2019-07-16 23:17:21
Document Index: 1967106

Matched Legal Cases: ['§ 1258', '§\u202f1258', '§\u202f13206', '§\u202f888', '§\u202f401', '§\u202f13206', '§\u202f1703']

26 U.S. Code § 1258 - Recharacterization of gain from certain financial transactions | U.S. Code | US Law | LII / Legal Information Institute
Section 1258. Recharacterization of gain from certain financial transactions
26 U.S. Code § 1258. Recharacterization of gain from certain financial transactions
(a) General ruleIn the case of any gain—
which (but for this section) would be treated as gain from the sale or exchange of a capital asset, and
which is recognized on the disposition or other termination of any position which was held as part of a conversion transaction,
(b) Applicable imputed income amountFor purposes of subsection (a), the term “applicable imputed income amount” means, with respect to any disposition or other termination referred to in subsection (a), an amount equal to—
the amount of interest which would have accrued on the taxpayer’s net investment in the conversion transaction for the period ending on the date of such disposition or other termination (or, if earlier, the date on which the requirements of subsection (c) ceased to be satisfied) at a rate equal to 120 percent of the applicable rate, reduced by
the amount treated as ordinary income under subsection (a) with respect to any prior disposition or other termination of a position which was held as a part of such transaction.
(c) Conversion transactionFor purposes of this section, the term “conversion transaction” means any transaction—
substantially all of the taxpayer’s expected return from which is attributable to the time value of the taxpayer’s net investment in such transaction, and
the holding of any property (whether or not actively traded), and the entering into a contract to sell such property (or substantially identical property) at a price determined in accordance with such contract, but only if such property was acquired and such contract was entered into on a substantially contemporaneous basis,
an applicable straddle,
any other transaction which is marketed or sold as producing capital gains from a transaction described in paragraph (1), or
any other transaction specified in regulations prescribed by the Secretary.
(2) Applicable rateThe term “applicable rate” means—
the applicable Federal rate determined under section 1274(d) (compounded semiannually) as if the conversion transaction were a debt instrument, or
if the term of the conversion transaction is indefinite, the Federal short-term rates in effect under section 6621(b) during the period of the conversion transaction (compounded daily).
(A) In generalIf any position with a built-in loss becomes part of a conversion transaction—
for purposes of applying this subtitle to such position for periods after such position becomes part of such transaction, such position shall be taken into account at its fair market value as of the time it became part of such transaction, except that
upon the disposition or other termination of such position in a transaction in which gain or loss is recognized, such built-in loss shall be recognized and shall have a character determined without regard to this section.
(A) In generalSubsection (a) shall not apply to transactions—
of an options dealer in the normal course of the dealer’s trade or business of dealing in options, or
of a commodities trader in the normal course of the trader’s trade or business of trading section 1256 contracts.
(C) Limited partners and limited entrepreneursIn the case of any gain from a transaction recognized by an entity which is allocable to a limited partner or limited entrepreneur (within the meaning of section 461(k)(4)), subparagraph (A) shall not apply if—
substantially all of the limited partner’s (or limited entrepreneur’s) expected return from the entity is attributable to the time value of the partner’s (or entrepreneur’s) net investment in such entity,
the transaction (or the interest in the entity) was marketed or sold as producing capital gains treatment from a transaction described in subsection (c)(1), or
the transaction (or the interest in the entity) is a transaction (or interest) specified in regulations prescribed by the Secretary.
(Added Pub. L. 103–66, title XIII, § 13206(a)(1), Aug. 10, 1993, 107 Stat. 462; amended Pub. L. 108–357, title VIII, § 888(c)(2), Oct. 22, 2004, 118 Stat. 1643; Pub. L. 115–141, div. U, title IV, § 401(a)(176)(B), Mar. 23, 2018, 132 Stat. 1192.)
2018—Subsec. (d)(5)(C). Pub. L. 115–141 substituted “section 461(k)(4)” for “section 464(e)(2)” in introductory provisions.
2004—Subsec. (d)(1). Pub. L. 108–357 struck out “; except that the term ‘personal property’ shall include stock” before period at end.
Pub. L. 103–66, title XIII, § 13206(a)(3), Aug. 10, 1993, 107 Stat. 465, as amended by Pub. L. 104–188, title I, § 1703(n)(11), Aug. 20, 1996, 110 Stat. 1877, provided that:
“The amendments made by this subsection [enacting this section] shall apply to conversion transactions entered into after April 30, 1993.”