Definitions and special rules
(1) Commodities derivative financial instruments For purposes of subsection (a)(6)— (A) Commodities derivatives dealer The term “commodities derivatives dealer” means a person which 1 1 So in original. Probably should be “who”. regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. (B) Commodities derivative financial instrument (i) In general The term “commodities derivative financial instrument” means any contract or financial instrument with respect to commodities (other than a share of stock in a corporation, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract (as defined in section 1256(b))), the value or settlement price of which is calculated by or determined by reference to a specified index. (ii) Specified index The term “specified index” means any one or more or any combination of— (I) a fixed rate, price, or amount, or (II) a variable rate, price, or amount, which is based on any current, objectively determinable financial or economic information with respect to commodities which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.
(2) Hedging transaction (A) In general For purposes of this section, the term “hedging transaction” means any transaction entered into by the taxpayer in the normal course of the taxpayer’s trade or business primarily— (i) to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer, (ii) to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by the taxpayer, or (iii) to manage such other risks as the Secretary may prescribe in regulations. (B) Treatment of nonidentification or improper identification of hedging transactions Notwithstanding subsection (a)(7), the Secretary shall prescribe regulations to properly characterize any income, gain, expense, or loss arising from a transaction— (i) which is a hedging transaction but which was not identified as such in accordance with subsection (a)(7), or (ii) which was so identified but is not a hedging transaction.
(3) Sale or exchange of self-created musical works At the election of the taxpayer, paragraphs (1) and (3) of subsection (a) shall not apply to musical compositions or copyrights in musical works sold or exchanged by a taxpayer described in subsection (a)(3).
(4) Regulations The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of paragraph (6) and (7) of subsection (a) in the case of transactions involving related parties.
(1)Commodities derivative financial instruments#
For purposes of subsection (a)(6)—
(A) Commodities derivatives dealer The term “commodities derivatives dealer” means a person which 1 1 So in original. Probably should be “who”. regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business.
(B) Commodities derivative financial instrument (i) In general The term “commodities derivative financial instrument” means any contract or financial instrument with respect to commodities (other than a share of stock in a corporation, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract (as defined in section 1256(b))), the value or settlement price of which is calculated by or determined by reference to a specified index. (ii) Specified index The term “specified index” means any one or more or any combination of— (I) a fixed rate, price, or amount, or (II) a variable rate, price, or amount, which is based on any current, objectively determinable financial or economic information with respect to commodities which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.
(1)(A)Commodities derivatives dealer#
The term “commodities derivatives dealer” means a person which 1 1 So in original. Probably should be “who”. regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business.
(1)(B)
(2)Hedging transaction#
(A) In general For purposes of this section, the term “hedging transaction” means any transaction entered into by the taxpayer in the normal course of the taxpayer’s trade or business primarily— (i) to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer, (ii) to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by the taxpayer, or (iii) to manage such other risks as the Secretary may prescribe in regulations.
(B) Treatment of nonidentification or improper identification of hedging transactions Notwithstanding subsection (a)(7), the Secretary shall prescribe regulations to properly characterize any income, gain, expense, or loss arising from a transaction— (i) which is a hedging transaction but which was not identified as such in accordance with subsection (a)(7), or (ii) which was so identified but is not a hedging transaction.
(2)(A)In general#
For purposes of this section, the term “hedging transaction” means any transaction entered into by the taxpayer in the normal course of the taxpayer’s trade or business primarily—
(i) to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer,
(ii) to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by the taxpayer, or
(iii) to manage such other risks as the Secretary may prescribe in regulations.
(2)(A)(i)
(3)Sale or exchange of self-created musical works#
At the election of the taxpayer, paragraphs (1) and (3) of subsection (a) shall not apply to musical compositions or copyrights in musical works sold or exchanged by a taxpayer described in subsection (a)(3).
(4)Regulations#
The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of paragraph (6) and (7) of subsection (a) in the case of transactions involving related parties.