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.
Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues was not intended or written by White & Case to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding any penalties that may be imposed on you or any other person under the Internal Revenue Code.
Click here to download PDF.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.