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Congressional tax reformers propose far-reaching tax changes for derivatives and other financial products

John S. Stanton

John S. Stanton,

Washington, D.C.

Robert Glennon

04 February 2013
House Ways and Means Committee Chairman Dave Camp (R-Mich.) has proposed to tax derivatives on an annual mark-to-market basis with ordinary gain or loss treatment. This far-reaching proposal is the centerpiece of a series of tax changes for financial products set forth in a discussion draft released on January 24 as part of Chairman Camp’s ongoing effort to develop comprehensive tax reform legislation.
Congressional tax reformers propose far-reaching tax changes for derivatives and other financial products

Copies of the official (1) overview, (2) summary (including comparison to current law), (3) detailed technical explanation, and (4) legislative language of the Financial Products Discussion Draft are attached for reference.

New mark-to-market regime for derivatives

As Chairman Camp’s Summary points out, under current law the tax treatment of gains and losses on derivatives is highly dependent upon the particular type of derivative, the profile of the taxpayer, and other factors. Thus, derivatives with virtually identical economic results can produce very different tax and book consequences in terms of character of the instrument and timing and character of income. Those planning opportunities for disparate tax results would be replaced by a single, uniform tax rule under Chairman Camp’s proposal.

Read: "Congressional tax reformers propose far-reaching tax changes for derivatives and other financial products"

Under applicable U.S. Treasury Regulations we are required to inform you that any advice contained in this email or any attachment hereto is not intended or written to be used, and cannot be used, either (i) to avoid penalties imposed under the Internal Revenue Code, or (ii) for promoting, marketing, or recommending to another party any tax-related matter addressed herein.

John S. Stanton

John S. Stanton,

Washington, D.C.

Robert Glennon

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