Regulations clarify treatment of a debt instrument under straddle rules

BY SALLY P. SCHREIBER, J.D.

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. 

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

Post-busy season checklist

Now that tax season is over, pause for some introspection to guarantee that next year’s busy season is even better. Bonus: “Dirty dozen” scams list to share with your clients. Sponsored by Thomson Reuters, Bloomberg BNA, Bloomberg BNA // Software and Wolters Kluwer.

QUIZ

News quiz: Risks are top of mind in finance

Americans are worried about risks to their financial security. Accountants also see risks to their organizations and their careers. See how much you know about recent news and reports with this quiz.

CHECKLIST

Auditing risks in culture

Cultural flaws can seriously damage an organization. Here’s how internal auditors can reduce risks by embedding culture audits into existing audit programs.