[Federal Register Volume 78, Number 209 (Tuesday, October 29, 2013)]
[Rules and Regulations]
[Pages 64396-64397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25361]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9627]
RIN 1545-BL04


Mixed Straddles; Straddle-by-Straddle Identification Under 
Section 1092(b)(2)(A)(i)(I); Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations; correcting amendments.

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SUMMARY: This document contains amendments to temporary regulations 
relating to guidance for taxpayers electing to establish a mixed 
straddle using straddle-by-straddle identification. These amendments 
include a change to the applicability date of the temporary regulations 
pursuant to which the temporary regulations apply to transactions 
established after the date of publication of the Treasury decision 
adopting these rules as final regulations in the Federal Register. The 
amendments to the temporary regulations will affect taxpayers who elect 
to establish a mixed straddle using straddle-by-straddle 
identification.

DATES: Effective Date: These amendments are effective on October 29, 
2013.
    Applicability Date: As corrected, Sec.  1.1092(b)-6T applies to 
identified mixed straddles established after the date of publication of 
the Treasury decision adopting these rules as final regulations in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Pamela Lew or Robert B. Williams at 
(202) 622-3950 (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    The temporary regulations that are the subject of these amendments 
are under section 1092 of the Internal Revenue Code (Code). The 
temporary regulations (TD 9627) were published in the Federal Register 
on Friday, August 2, 2013 (78 FR 46807). The temporary regulations 
applied to all identified mixed straddles established after the date of 
filing, August 1, 2013.

Need for Amendments

    The Treasury Department and the IRS received comments raising 
concerns about the immediate applicability date of the temporary 
regulations. In response to those comments, this document amends the 
temporary

[[Page 64397]]

regulations to limit the application of the identified mixed straddle 
transaction rules in Sec.  1.1092(b)-6T to section 1092(b)(2) 
identified mixed straddles established after the date of publication of 
the Treasury decision adopting these rules as final regulations in the 
Federal Register. This document also amends the examples in the 
temporary regulations to reflect the change in the applicability date 
and to clarify the determination of a holding period. The Treasury 
Department and the IRS anticipate finalizing the regulations no later 
than the end of the current Priority Guidance Plan year on June 30, 
2014, and will as part of that process consider all comments received.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 1.1092(b)-6T also issued under 26 U.S.C. 1092(b)(1).
    Section 1.1092(b)-6T also issued under 26 U.S.C. 1092(b)(2).* * 
*


0
Par. 2. Section 1.1092(b)-3T is amended by:
0
1. Revising the heading of paragraph (b)(6).
0
2. Revising the first sentence of paragraph (b)(6).
    The amendments read as follows:


Sec.  1.1092(b)-3T  Mixed straddles; straddle-by-straddle 
identification under section 1092(b)(2)(A)(i)(I) (Temporary).

* * * * *
    (b)(6) Accrued gain and loss with respect to positions of a section 
1092(b)(2) identified mixed straddle established on or before the 
applicability date of Sec.  1.1092(b)-6T. The rules of this paragraph 
(b)(6) apply to all section 1092(b)(2) identified mixed straddles 
established on or before the applicability date of Sec.  1.1092(b)-6T; 
see Sec.  1.1092(b)-6T for section 1092(b)(2) identified mixed 
straddles established after the applicability date of Sec.  1.1092(b)-
6T.* * *
* * * * *

0
Par. 3. Section 1.1092(b)-6T is amended as follows:
0
1. Revising the heading of Sec.  1.1092(b)-6T.
0
2. Adding a sentence at the end of the introductory text of paragraph 
(b) and revising Example 1 and Example 2 of paragraph (b).
0
3. Revising paragraph (c).
    The amendments read as follows:


Sec.  1.1092(b)-6T  Mixed straddles; accrued gain and loss associated 
with a position that becomes part of a section 1092(b)(2) identified 
mixed straddle.

    * * *
    (b) * * * The following examples assume that this section applies 
to identified mixed straddles established after August 1, Year 2.

    Example 1. On August 13, Year 2, A enters into a section 1256 
contract. As of the close of the day on August 15, Year 2, there is 
$500 of unrealized loss on the section 1256 contract. On August 16, 
Year 2, A enters into an offsetting non-section 1256 position and 
makes a valid election to treat the straddle as a section 1092(b)(2) 
identified mixed straddle. A continues to hold both positions of the 
section 1092(b)(2) identified mixed straddle on January 1, Year 3. 
Under these circumstances, A will recognize the $500 loss on the 
section 1256 contract that existed prior to establishing the section 
1092(b)(2) identified mixed straddle on the last business day of 
Year 2 because the section 1256 contract would be treated as sold on 
December 31, Year 2, (the last business day of the taxable year) 
under section 1256(a). The loss recognized in Year 2 will be treated 
as 60% long-term capital loss and 40% short-term capital loss. All 
gains and losses occurring after the section 1092(b)(2) identified 
mixed straddle is established are accounted for under the applicable 
provisions in Sec.  1.1092(b)-3T.
    Example 2.  On September 3, Year 1, A enters into a non-section 
1256 position. As of the close of the day on August 22, Year 2, 
there is $400 of unrealized short-term capital gain on the non-
section 1256 position. On August 23, Year 2, A enters into an 
offsetting section 1256 contract and makes a valid election to treat 
the straddle as a section 1092(b)(2) identified mixed straddle. On 
September 10, Year 2, A closes out the section 1256 contract at a 
$500 loss and disposes of the non-section 1256 position, realizing 
an $875 gain. Under these circumstances, A has $400 of short-term 
capital gain attributable to the non-section 1256 position prior to 
the day the section 1092(b)(2) identified mixed straddle was 
established. The $400 unrealized gain earned on the non-section 1256 
position will be recognized on September 10, Year 2, when the non-
section 1256 position is disposed of. The gain will be short-term 
capital gain. See Sec.  1.1092(b)-2T for rules concerning holding 
period. On September 10, Year 2, the gain of $875 on the non-section 
1256 position will be reduced to $475 to take into account the $400 
of unrealized gain when the section 1092(b)(2) identified mixed 
straddle was established. The $475 gain on the non-section 1256 
position will be offset by the $500 loss on the section 1256 
contract. The net loss of $25 from the straddle will be treated as 
60% long-term capital loss and 40% short-term capital loss because 
it is attributable to the section 1256 contract.

    (c) Effective/applicability date. The rules of this section apply 
to all section 1092(b)(2) identified mixed straddles established after 
the date of publication of the Treasury decision adopting these rules 
as final regulations in the Federal Register.
* * * * *

Martin Franks,
Branch Chief, Publications & Regulations Branch, Legal Processing 
Division, Associate Chief Counsel, (Procedure & Administration).
[FR Doc. 2013-25361 Filed 10-25-13; 8:45 am]
BILLING CODE 4830-01-P