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

"We need to talk."

Start a conversation with your clients using these questions and checklist for post busy-season business development.

NEWS

Revenue recognition revisited

A reexamination of new revenue recognition rules has led to tinkering with the standard that is considered the biggest achievement of the convergence efforts of FASB and the International Accounting Standards Board.

INTERVIEW

Staying focused at the top

Olivia Kirtley, CPA, CGMA, an accomplished corporate director with almost 20 years of experience serving on boards, talks about strategic, risk, and compliance issues that keep board members up at night.