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16.1 Certain Swaps Not Treated as IRC Section 1256 Contracts

<< Title XVI Overview

16.1 Certain Swaps Not Treated as IRC Section 1256 Contracts

 

 


Under section 1256, certain kinds of futures and options contracts are treated as if they are sold at fair market value on the last business day of the tax year.  The resulting gain or loss from such sale is favorably treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss.  Title XVI excludes certain swaps transactions from this preferential treatment, including (i) interest rate swaps, currency swaps, commodity swaps, equity swaps, equity index swaps, credit default swaps, and similar agreements; and (ii) securities futures contracts or options thereon unless the contract or option is a dealer securities futures contract. The provisions of Title XVI will apply to taxable years following enactment of this Act. [§1601]