Sec. 401 Short title
This title may be cited as the “Closing the Derivatives Blended Rate Loophole Act”.
Title IV — Closing the derivatives blended rate loophole
IV Closing the derivatives blended rate loophole
Sec. 402 Modifications to treatment of section 1256 contracts
Elimination of blended capital gain or loss treatment in favor of short-Term capital gain or loss—
In general— Paragraph (3) of section 1256(a) is amended to read as follows:
“(3) any gain or loss with respect to a section 1256 contract shall be treated as short-term capital gain or loss, and”
Conforming amendments— Subsection (f) of section 1256 is amended by striking paragraphs (2), (3), and (4) and by redesignating paragraph (5) as paragraph (2).
Conforming amendments—
Clause (iv) of section 988(c)(1)(E) is amended to read as follows:
“(iv) Treatment of certain currency contracts—Except as provided in regulations, in the case of a qualified fund, any bank forward contract, any foreign currency futures contract traded on a foreign exchange, or to the extent provided in regulations any similar instrument, which is not otherwise a section 1256 contract shall be treated as a section 1256 contract for purposes of section 1256.”
Subparagraph (A) of section 1212(c)(1) is amended by striking “preceding taxable year” and all that follows and inserting “preceding taxable year, the amount so allowed shall be treated as short-term capital loss from section 1256 contracts.”.
Subparagraph (A) of section 1212(c)(6) is amended by striking “preceding taxable year” and all that follows and inserting “preceding taxable year, the amount allowed as a carryback shall be treated as short-term gain for the loss year.”.
Subparagraph (B) of section 1212(c)(6) is amended by striking “or long-term”.
Subsection (f) of section 1256 is amended by striking paragraphs (3) and (4) and by redesignating paragraph (5) as paragraph (3).
Effective dates—
In general— Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Conforming amendments— The amendments made by paragraphs (2), (3), and (4) of subsection (b) shall apply to losses for taxable years beginning after the date of the enactment of this Act.
Sec. 403 Modifications to treatment of dealers in securities and commodities
Modification of definition of security— Paragraph (2) of section 475(c) is amended by striking the second sentence.
Required mark to market for dealers in commodities— Subsection (e) of section 475 is amended—
by striking “In the case of a dealer in commodities who elects the application of this subsection, this section shall apply to commodities held by such dealer” in paragraph (1) and inserting “This section shall apply to commodities held by a dealer in commodities”, and
by striking paragraph (3).
Commodities derivatives dealers— Clause (i) of section 1221(b)(1)(B) is amended by striking “a note, bond, or other evidence of indebtedness, or a section 1256 contract (as defined in section 1256(b))” and inserting “or a note, bond, or other evidence of indebtedness)”.
Technical amendment— Paragraph (1) of section 1402(i) is amended by striking “subsection (a)(3)(A)” and inserting “subsection (a)(3)”.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.