If there is a constructive sale of an appreciated financial position-
For purposes of this section-
Except as provided in paragraph (2), the term "appreciated financial position" means any position with respect to any stock, debt instrument, or partnership interest if there would be gain were such position sold, assigned, or otherwise terminated at its fair market value.
The term "appreciated financial position" shall not include-
The term "position" means an interest, including a futures or forward contract, short sale, or option.
For purposes of this section-
A taxpayer shall be treated as having made a constructive sale of an appreciated financial position if the taxpayer (or a related person)-
A taxpayer shall not be treated as having made a constructive sale solely because the taxpayer enters into a contract for sale of any stock, debt instrument, or partnership interest which is not a marketable security (as defined in section 453(f)) if the contract settles within 1 year after the date such contract is entered into.
In applying this section, there shall be disregarded any transaction (which would otherwise cause a constructive sale) during the taxable year if-
If-
the transaction referred to in clause (ii) shall be disregarded for purposes of determining whether the requirements of subparagraph (A)(iii) are met with respect to the transaction described in clause (i).
A person is related to another person with respect to a transaction if-
For purposes of this section-
The term "forward contract" means a contract to deliver a substantially fixed amount of property (including cash) for a substantially fixed price.
The term "offsetting notional principal contract" means, with respect to any property, an agreement which includes-
If-
solely for purposes of determining whether the taxpayer has entered into a constructive sale of any other appreciated financial position held by the taxpayer, the taxpayer shall be treated as entering into such transaction immediately after such disposition. For purposes of the preceding sentence, an assignment or other termination shall be treated as a disposition.
For purposes of this section, an interest in a trust which is actively traded (within the meaning of section 1092(d)(1)) shall be treated as stock unless substantially all (by value) of the property held by the trust is debt described in subsection (b)(2)(A).
If a taxpayer holds multiple positions in property, the determination of whether a specific transaction is a constructive sale and, if so, which appreciated financial position is deemed sold shall be made in the same manner as actual sales.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
26 U.S.C. § 1259
EDITORIAL NOTES
AMENDMENTS2004-Subsec. (c)(2). Pub. L. 108-311, §406(e)(1), substituted "A taxpayer shall not be treated as having made a constructive sale solely because the taxpayer enters into a contract" for "The term 'constructive sale' shall not include any contract".Subsec. (c)(3)(A). Pub. L. 108-311, §406(e)(2), substituted "cause a constructive sale" for "be treated as a constructive sale" in introductory provisions. Subsec. (c)(3)(A)(i). Pub. L. 108-311, §406(e)(3), substituted "on or before" for "before the end of".Subsec. (c)(3)(B). Pub. L. 108-311, §406(e)(7), substituted "certain closed transactions where risk of loss on appreciated financial position diminished" for "positions which are reestablished" in heading.Subsec. (c)(3)(B)(i). Pub. L. 108-311, §406(e)(2), substituted "cause a constructive sale" for "be treated as a constructive sale".Subsec. (c)(3)(B)(ii). Pub. L. 108-311, §406(e)(4), struck out "substantially similar" after "another" in introductory provisions.Subsec. (c)(3)(B)(ii)(I). Pub. L. 108-311, §406(e)(5), amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: "which also would otherwise be treated as a constructive sale of such position,". Subsec. (c)(3)(B)(ii)(II). Pub. L. 108-311, §406(e)(6), inserted "on or" before "before the 30th day". 1998-Subsec. (b)(2)(A)(i) to (iii). Pub. L. 105-206, §6010(a)(1)(A), substituted "position" for "debt". Subsec. (b)(2)(B), (C). Pub. L. 105-206, §6010(a)(1)(B), (C), added subpar. (B) and redesignated former subpar. (B) as (C). Subsec. (d)(1). Pub. L. 105-206, §6010(a)(2), inserted "(including cash)" after "property".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108-311 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to which such amendment relates, see section 406(h) of Pub. L. 108-311, set out as a note under section 55 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105-206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to which such amendment relates, see section 6024 of Pub. L. 105-206, set out as a note under section 1 of this title.
EFFECTIVE DATESection applicable to any constructive sale after June 8, 1997, with certain exceptions, see section 1001(d) of Pub. L. 105-34, set out as an Effective Date of 1997 Amendment note under section 475 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- transaction
- The term "transaction" includes a series of transactions.