IRS Finalizes Regulations on Transfers of Derivative Contracts | White & Case LLP International Law Firm, Global Law Practice
IRS Finalizes Regulations on Transfers of Derivative Contracts

IRS Finalizes Regulations on Transfers of Derivative Contracts

The IRS has issued final regulations on the transfer or assignment of certain derivative contracts. A derivative is a financial instrument that is priced upon a derivation of the value of one or several underlying assets, liabilities, or indices. In general, there are two types of derivatives: privately negotiated contracts, which are known as over-the-counter derivatives, and standardized derivatives that are often traded on exchanges.

The regulations issued today provide:

(1) Guidance to the non-assigning counterparty to a derivative contract and an assignee on certain notional principal contracts that are derivative contracts; and

(2) Instruction that the non-assigning counterparty does not have an exchange for purposes of §1.1001-1(a) when certain derivative contracts are transferred or assigned, and clarifification that the embedded loan rules of §1.446-3(g)(4) do not apply to such transactions.

 

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