On
Wednesday, the IRS issued identical temporary (T.D. 9635) and proposed regulations (REG-111753-12) to clarify the treatment of
debt instruments that are part of a straddle. The regulations
provide guidance for when an issuer’s obligation under a debt
instrument may be a position in actively traded personal
property, in which case it can be part of a straddle.
A straddle is defined in Sec. 1092 as offsetting
positions with respect to personal property. Under the
temporary regulations, if a taxpayer is an obligor under a
debt instrument, one or more payments on which are linked to
the value of personal property or a position with respect to
personal property, then the taxpayer’s obligation under the
debt instrument is a position with respect to personal
property and may be part of a straddle.
The regulations adopt without change proposed regulations issued in 2001 (REG-105801-00). The temporary regulations issued today apply to straddles established on or after Jan. 17, 2001, the date the original proposed regulations were published in the Federal Register. Taxpayers can submit written comments on the regulations for 60 days after Sept. 5. A public hearing on the new rules is scheduled for Jan. 15 in Washington.
