
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)[401(e)]]
[CITE: 26USC1092]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
                     PART VII--WASH SALES; STRADDLES
 
Sec. 1092. Straddles


(a) Recognition of loss in case of straddles, etc.

                (1) Limitation on recognition of loss

        (A) In general

            Any loss with respect to 1 or more positions shall be taken 
        into account for any taxable year only to the extent that the 
        amount of such loss exceeds the unrecognized gain (if any) with 
        respect to 1 or more positions which were offsetting positions 
        with respect to 1 or more positions from which the loss arose.

        (B) Carryover of loss

            Any loss which may not be taken into account under 
        subparagraph (A) for any taxable year shall, subject to the 
        limitations under subparagraph (A), be treated as sustained in 
        the succeeding taxable year.

              (2) Special rule for identified straddles

        (A) In general

            In the case of any straddle which is an identified straddle 
        as of the close of any taxable year--
                (i) paragraph (1) shall not apply for such taxable year, 
            and
                (ii) any loss with respect to such straddle shall be 
            treated as sustained not earlier than the day on which all 
            of the positions making up the straddle are disposed of.

        (B) Identified straddle

            The term ``identified straddle'' means any straddle--
                (i) which is clearly identified on the taxpayer's 
            records as an identified straddle before the earlier of--
                    (I) the close of the day on which the straddle is 
                acquired, or
                    (II) such time as the Secretary may prescribe by 
                regulations.

                (ii) all of the original positions of which (as 
            identified by the taxpayer) are acquired on the same day and 
            with respect to which--
                    (I) all of such positions are disposed of on the 
                same day during the taxable year, or
                    (II) none of such positions has been disposed of as 
                of the close of the taxable year, and

                (iii) which is not part of a larger straddle.

                        (3) Unrecognized gain

        For purposes of this subsection--

        (A) In general

            The term ``unrecognized gain'' means--
                (i) in the case of any position held by the taxpayer as 
            of the close of the taxable year, the amount of gain which 
            would be taken into account with respect to such position if 
            such position were sold on the last business day of such 
            taxable year at its fair market value, and
                (ii) in the case of any position with respect to which, 
            as of the close of the taxable year, gain has been realized 
            but not recognized, the amount of gain so realized.

        (B) Reporting of gain

            (i) In general

                Each taxpayer shall disclose to the Secretary, at such 
            time and in such manner and form as the Secretary may 
            prescribe by regulations--
                    (I) each position (whether or not part of a 
                straddle) with respect to which, as of the close of the 
                taxable year, there is unrecognized gain, and
                    (II) the amount of such unrecognized gain.
            (ii) Reports not required in certain cases

                Clause (i) shall not apply--
                    (I) to any position which is part of an identified 
                straddle,
                    (II) to any position which, with respect to the 
                taxpayer, is property described in paragraph (1) or (2) 
                of section 1221(a) or to any position which is part of a 
                hedging transaction (as defined in section 1256(e)), or
                    (III) with respect to any taxable year if no loss on 
                a position (including a regulated futures contract) has 
                been sustained during such taxable year or if the only 
                loss sustained on such position is a loss described in 
                subclause (II).

(b) Regulations

                           (1) In general

        The Secretary shall prescribe such regulations with respect to 
    gain or loss on positions which are a part of a straddle as may be 
    appropriate to carry out the purposes of this section and section 
    263(g). To the extent consistent with such purposes, such 
    regulations shall include rules applying the principles of 
    subsections (a) and (d) of section 1091 and of subsections (b) and 
    (d) of section 1233.

             (2) Regulations relating to mixed straddles

        (A) Elective provisions in lieu of section 1233(d) principles

            The regulations prescribed under paragraph (1) shall provide 
        that--
                (i) the taxpayer may offset gains and losses from 
            positions which are part of mixed straddles--
                    (I) by straddle-by-straddle identification, or
                    (II) by the establishment (with respect to any class 
                of activities) of a mixed straddle account for which 
                gains and losses would be recognized (and offset) on a 
                periodic basis,

                (ii) such offsetting will occur before the application 
            of section 1256, and section 1256(a)(3) will only apply to 
            net gain or net loss attributable to section 1256 contracts, 
            and
                (iii) the principles of section 1233(d) shall not apply 
            with respect to any straddle identified under clause (i)(I) 
            or part of an account established under clause (i)(II).

        (B) Limitation on net gain or net loss from mixed straddle 
                account

            In the case of any mixed straddle account referred to in 
        subparagraph (A)(i)(II)--
            (i) Not more than 50 percent of net gain may be 
                    treated as long-term capital gain

                In no event shall more than 50 percent of the net gain 
            from such account for any taxable year be treated as long-
            term capital gain.
            (ii) Not more than 40 percent of net loss may be 
                    treated as short-term capital loss

                In no event shall more than 40 percent of the net loss 
            from such account for any taxable year be treated as short-
            term capital loss.

        (C) Authority to treat certain positions as mixed straddles

            The regulations prescribed under paragraph (1) may treat as 
        a mixed straddle positions not described in section 1256(d)(4).

        (D) Timing and character authority

            The regulations prescribed under paragraph (1) shall include 
        regulations relating to the timing and character of gains and 
        losses in case of straddles where at least 1 position is 
        ordinary and at least 1 position is capital.

(c) Straddle defined

    For purposes of this section--

                           (1) In general

        The term ``straddle'' means offsetting positions with respect to 
    personal property.

                      (2) Offsetting positions

        (A) In general

            A taxpayer holds offsetting positions with respect to 
        personal property if there is a substantial diminution of the 
        taxpayer's risk of loss from holding any position with respect 
        to personal property by reason of his holding 1 or more other 
        positions with respect to personal property (whether or not of 
        the same kind).

        (B) One side larger than other side

            If 1 or more positions offset only a portion of 1 or more 
        other positions, the Secretary shall by regulations prescribe 
        the method for determining the portion of such other positions 
        which is to be taken into account for purposes of this section.

        (C) Special rule for identified straddles

            In the case of any position which is not part of an 
        identified straddle (within the meaning of subsection 
        (a)(2)(B)), such position shall not be treated as offsetting 
        with respect to any position which is part of an identified 
        straddle.

                           (3) Presumption

        (A) In general

            For purposes of paragraph (2), 2 or more positions shall be 
        presumed to be offsetting if--
                (i) the positions are in the same personal property 
            (whether established in such property or a contract for such 
            property),
                (ii) the positions are in the same personal property, 
            even though such property may be in a substantially altered 
            form,
                (iii) the positions are in debt instruments of a similar 
            maturity or other debt instruments described in regulations 
            prescribed by the Secretary,
                (iv) the positions are sold or marketed as offsetting 
            positions (whether or not such positions are called a 
            straddle, spread, butterfly, or any similar name),
                (v) the aggregate margin requirement for such positions 
            is lower than the sum of the margin requirements for each 
            such position (if held separately), or
                (vi) there are such other factors (or satisfaction of 
            subjective or objective tests) as the Secretary may by 
            regulations prescribe as indicating that such positions are 
            offsetting.

        For purposes of the preceding sentence, 2 or more positions 
        shall be treated as described in clause (i), (ii), (iii), or 
        (vi) only if the value of 1 or more of such positions ordinarily 
        varies inversely with the value of 1 or more other such 
        positions.

        (B) Presumption may be rebutted

            Any presumption established pursuant to subparagraph (A) may 
        be rebutted.

    (4) Exception for certain straddles consisting of qualified 
                 covered call options and the optioned stock

        (A) In general

            If--
                (i) all the offsetting positions making up any straddle 
            consist of 1 or more qualified covered call options and the 
            stock to be purchased from the taxpayer under such options, 
            and
                (ii) such straddle is not part of a larger straddle,

        such straddle shall not be treated as a straddle for purposes of 
        this section and section 263(g).

        (B) Qualified covered call option defined

            For purposes of subparagraph (A), the term ``qualified 
        covered call option'' means any option granted by the taxpayer 
        to purchase stock held by the taxpayer (or stock acquired by the 
        taxpayer in connection with the granting of the option) but only 
        if--
                (i) such option is traded on a national securities 
            exchange which is registered with the Securities and 
            Exchange Commission or other market which the Secretary 
            determines has rules adequate to carry out the purposes of 
            this paragraph,
                (ii) such option is granted more than 30 days before the 
            day on which the option expires,
                (iii) such option is not a deep-in-the-money option,
                (iv) such option is not granted by an options dealer 
            (within the meaning of section 1256(g)(8)) in connection 
            with his activity of dealing in options, and
                (v) gain or loss with respect to such option is not 
            ordinary income or loss.

        (C) Deep-in-the-money option

            For purposes of subparagraph (B), the term ``deep-in-the-
        money option'' means an option having a strike price lower than 
        the lowest qualified bench mark.

        (D) Lowest qualified bench mark

            (i) In general

                Except as otherwise provided in this subparagraph, for 
            purposes of subparagraph (C), the term ``lowest qualified 
            bench mark'' means the highest available strike price which 
            is less than the applicable stock price.
            (ii) Special rule where option is for period more 
                    than 90 days and strike price exceeds $50

                In the case of an option--
                    (I) which is granted more than 90 days before the 
                date on which such option expires, and
                    (II) with respect to which the strike price is more 
                than $50,

          the lowest qualified bench mark is the second highest 
            available strike price which is less than the applicable 
            stock price.
            (iii) 85 percent rule where applicable stock price 
                    $25 or less

                If--
                    (I) the applicable stock price is $25 or less, and
                    (II) but for this clause, the lowest qualified bench 
                mark would be less than 85 percent of the applicable 
                stock price,

          the lowest qualified bench mark shall be treated as equal to 
            85 percent of the applicable stock price.
            (iv) Limitation where applicable stock price $150 or 
                    less

                If--
                    (I) the applicable stock price is $150 or less, and
                    (II) but for this clause, the lowest qualified bench 
                mark would be less than the applicable stock price 
                reduced by $10,

          the lowest qualified bench mark shall be treated as equal to 
            the applicable stock price reduced by $10.

        (E) Special year-end rule

            Subparagraph (A) shall not apply to any straddle for 
        purposes of section 1092(a) if--
                (i) the qualified covered call options referred to in 
            such subparagraph are closed or the stock is disposed of at 
            a loss during any taxable year,
                (ii) gain on disposition of the stock to be purchased 
            from the taxpayer under such options or gains on such 
            options are includible in gross income for a later taxable 
            year, and
                (iii) such stock or option was not held by the taxpayer 
            for 30 days or more after the closing of such options or the 
            disposition of such stock.

        For purposes of the preceding sentence, the rules of paragraphs 
        (3) (other than subparagraph (B) \1\ thereof) and (4) of section 
        246(c) shall apply in determining the period for which the 
        taxpayer holds the stock.
---------------------------------------------------------------------------
    \1\ See References in Text note below.
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        (F) Strike price

            For purposes of this paragraph, the term ``strike price'' 
        means the price at which the option is exercisable.

        (G) Applicable stock price

            For purposes of subparagraph (D), the term ``applicable 
        stock price'' means, with respect to any stock for which an 
        option has been granted--
                (i) the closing price of such stock on the most recent 
            day on which such stock was traded before the date on which 
            such option was granted, or
                (ii) the opening price of such stock on the day on which 
            such option was granted, but only if such price is greater 
            than 110 percent of the price determined under clause (i).

        (H) Regulations

            The Secretary shall prescribe such regulations as may be 
        necessary or appropriate to carry out the purposes of this 
        paragraph. Such regulations may include modifications to the 
        provisions of this paragraph which are appropriate to take 
        account of changes in the practices of option exchanges or to 
        prevent the use of options for tax avoidance purposes.

(d) Definitions and special rules

    For purposes of this section--

                        (1) Personal property

        The term ``personal property'' means any personal property of a 
    type which is actively traded.

                            (2) Position

        The term ``position'' means an interest (including a futures or 
    forward contract or option) in personal property.

                     (3) Special rules for stock

        For purposes of paragraph (1)--

        (A) In general

            Except as provided in subparagraph (B), the term ``personal 
        property'' does not include stock. The preceding sentence shall 
        not apply to any interest in stock.

        (B) Exceptions

            The term ``personal property'' includes--
                (i) any stock which is part of a straddle at least 1 of 
            the offsetting positions of which is--
                    (I) an option with respect to such stock or 
                substantially identical stock or securities,
                    (II) a securities futures contract (as defined in 
                section 1234B) with respect to such stock or 
                substantially identical stock or securities, or
                    (III) under regulations, a position with respect to 
                substantially similar or related property (other than 
                stock), and

                (ii) any stock of a corporation formed or availed of to 
            take positions in personal property which offset positions 
            taken by any shareholder.

        (C) Special rules

                (i) For purposes of subparagraph (B), subsection (c) and 
            paragraph (4) shall be applied as if stock described in 
            clause (i) or (ii) of subparagraph (B) were personal 
            property.
                (ii) For purposes of determining whether subsection (e) 
            applies to any transaction with respect to stock described 
            in clause (ii) of subparagraph (B), all includible 
            corporations of an affiliated group (within the meaning of 
            section 1504(a)) shall be treated as 1 taxpayer.

             (4) Positions held by related persons, etc.

        (A) In general

            In determining whether 2 or more positions are offsetting, 
        the taxpayer shall be treated as holding any position held by a 
        related person.

        (B) Related person

            For purposes of subparagraph (A), a person is a related 
        person to the taxpayer if with respect to any period during 
        which a position is held by such person, such person--
                (i) is the spouse of the taxpayer, or
                (ii) files a consolidated return (within the meaning of 
            section 1501) with the taxpayer for any taxable year which 
            includes a portion of such period.

        (C) Certain flowthrough entities

            If part or all of the gain or loss with respect to a 
        position held by a partnership, trust, or other entity would 
        properly be taken into account for purposes of this chapter by a 
        taxpayer, then, except to the extent otherwise provided in 
        regulations, such position shall be treated as held by the 
        taxpayer.

             (5) Special rule for section 1256 contracts

        (A) General rule

            In the case of a straddle at least 1 (but not all) of the 
        positions of which are section 1256 contracts, the provisions of 
        this section shall apply to any section 1256 contract and any 
        other position making up such straddle.

        (B) Special rule for identified straddles

            For purposes of subsection (a)(2) (relating to identified 
        straddles), subparagraph (A) and section 1256(a)(4) shall not 
        apply to a straddle all of the offsetting positions of which 
        consist of section 1256 contracts.

                      (6) Section 1256 contract

        The term ``section 1256 contract'' has the meaning given such 
    term by section 1256(b).

               (7) Special rules for foreign currency

        (A) Position to include interest in certain debt

            For purposes of paragraph (2), an obligor's interest in a 
        nonfunctional currency denominated debt obligation is treated as 
        a position in the nonfunctional currency.

        (B) Actively traded requirement

            For purposes of paragraph (1), foreign currency for which 
        there is an active interbank market is presumed to be actively 
        traded.

(e) Exception for hedging transactions

    This section shall not apply in the case of any hedging transaction 
(as defined in section 1256(e)).

(f) Treatment of gain or loss and suspension of holding period where 
        taxpayer grantor of qualified covered call option

    If a taxpayer holds any stock and grants a qualified covered call 
option to purchase such stock with a strike price less than the 
applicable stock price--

                        (1) Treatment of loss

        Any loss with respect to such option shall be treated as long-
    term capital loss if, at the time such loss is realized, gain on the 
    sale or exchange of such stock would be treated as long-term capital 
    gain.

                  (2) Suspension of holding period

        The holding period of such stock shall not include any period 
    during which the taxpayer is the grantor of such option.

(g) Cross reference

            For provision requiring capitalization of certain interest 
        and carrying charges where there is a straddle, see section 
        263(g).

(Added Pub. L. 97-34, title V, Sec. 501(a), Aug. 13, 1981, 95 Stat. 323; 
amended Pub. L. 97-448, title I, Sec. 105(a)(1)(A)-(C), (2)-(4), Jan. 
12, 1983, 96 Stat. 2384, 2385; Pub. L. 98-369, div. A, title I, 
Secs. 101(a)-(d), 102(e)(2), 103(a), 107(a), July 18, 1984, 98 Stat. 
616-619, 624, 627, 629; Pub. L. 99-514, title III, Sec. 331(a), title 
XII, Sec. 1261(b), title XVIII, Secs. 1808(c), 1899A(66), Oct. 22, 1986, 
100 Stat. 2220, 2591, 2817, 2962; Pub. L. 100-647, title VI, 
Sec. 6130(c), Nov. 10, 1988, 102 Stat. 3719; Pub. L. 105-34, title XII, 
Sec. 1271(b)(9), Aug. 5, 1997, 111 Stat. 1037; Pub. L. 106-170, title V, 
Sec. 532(c)(1)(F), Dec. 17, 1999, 113 Stat. 1930; Pub. L. 106-554, 
Sec. 1(a)(7) [title IV, Sec. 401(e)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-649.)

                       References in Text

    Section 246(c)(3) of this title, referred to in subsec. (c)(4)(E), 
was amended by Pub. L. 105-34, title X, Sec. 1015(b)(2), Aug. 5, 1997, 
111 Stat. 922, by striking out subpar. (B) and redesignating subpar. (C) 
as (B).


                               Amendments

    2000--Subsec. (d)(3)(B)(i)(II), (III). Pub. L. 106-554 added subcl. 
(II) and redesignated former subcl. (II) as (III).
    1999--Subsec. (a)(3)(B)(ii)(II). Pub. L. 106-170 substituted 
``1221(a)'' for ``1221''.
    1997--Subsec. (f)(2). Pub. L. 105-34 substituted ``The'' for 
``Except for purposes of section 851(b)(3), the''.
    1988--Subsec. (b)(2)(D). Pub. L. 100-647 added subpar. (D).
    1986--Subsec. (c)(4)(E). Pub. L. 99-514, Sec. 331(a), in cl. (i), 
inserted ``or the stock is disposed of at a loss'', in cl. (ii), 
substituted ``or gains on such options are'' for ``is'', and in cl. 
(iii), inserted ``or option'' and ``or the disposition of such stock''.
    Subsec. (d)(3)(A). Pub. L. 99-514, Sec. 1808(c), inserted at end 
``The preceding sentence shall not apply to any interest in stock.''
    Subsec. (d)(5), (6). Pub. L. 99-514, Sec. 1899A(66), amended 
directory language of section 101(b)(2) of Pub. L. 98-369 to clarify 
general amendment by sections 101(d) and 102(e) of Pub. L. 98-369. See 
1984 Amendment notes below.
    Subsec. (d)(7). Pub. L. 99-514, Sec. 1261(b), added par. (7).
    1984--Subsec. (a)(2)(B)(i). Pub. L. 98-369, Sec. 107(a), designated 
existing provisions as subcl. (I) and added subcl. (II).
    Subsec. (b). Pub. L. 98-369, Sec. 103(a), amended subsec. (b) 
generally, substituting provisions dealing with regulations for 
provisions dealing with character of gain or loss and wash sales.
    Subsec. (c)(4). Pub. L. 98-369, Sec. 101(a)(2), added par. (4).
    Subsec. (d)(1). Pub. L. 98-369, Sec. 101(b)(1), struck out ``(other 
than stock)'' before ``of a type''.
    Subsec. (d)(2). Pub. L. 98-369, Sec. 101(a)(1), redesignated former 
subpar. (A) as entire par. (2), and struck out former subpar. (B) which 
provided that ``position'' includes any stock option which is a part of 
a straddle and which is an option to buy or sell stock which is actively 
traded, but does not include a stock option which (i) is traded on a 
domestic exchange or on a similar foreign exchange designated by the 
Secretary, and (ii) is of a type with respect to which the maximum 
period during which such option may be exercised is less than the 
minimum period for which a capital asset must be held for gain to be 
treated as long-term capital gain under section 1222(3).
    Subsec. (d)(3), (4). Pub. L. 98-369, Sec. 101(b)(2), as amended by 
Pub. L. 99-514, Sec. 1899A(66), added par. (3) and redesignated former 
pars. (3) and (4) as (4) and (5), respectively.
    Subsec. (d)(5). Pub. L. 98-369, Sec. 101(d), amended par. (4) 
generally, substituting provisions relating to special rules for section 
1256 contracts for provisions relating to special rules for regulated 
futures contracts.
    Pub. L. 98-369, Sec. 101(b)(2), as amended by Pub. L. 99-514, 
Sec. 1899A(66), redesignated former par. (4) as (5). Former par. (5) 
redesignated (6).
    Subsec. (d)(6). Pub. L. 98-369, Sec. 102(e)(2), amended par. (5) 
generally, substituting references to section 1256 contracts for 
references to regulated futures contracts wherever appearing in heading 
and text.
    Pub. L. 98-369, Sec. 101(b)(2), as amended by Pub. L. 99-514, 
Sec. 1899A(66), redesignated former par. (5) as (6).
    Subsecs. (f), (g). Pub. L. 98-369, Sec. 101(c), added subsec. (f) 
and redesignated former subsec. (f) as (g).
    1983--Subsec. (a)(1)(A). Pub. L. 97-448, Sec. 105(a)(1)(A), (2), 
substituted ``unrecognized gain'' for ``unrealized gain'' and ``which 
were offsetting positions with respect to 1 or more positions from which 
the loss arose'' for ``which-- (i) were acquired by the taxpayer before 
the disposition giving rise to such loss, (ii) were offsetting positions 
with respect to the 1 or more positions from which the loss arose, and 
(iii) were not part of an identified straddle as of the close of the 
taxable year''.
    Subsec. (a)(3). Pub. L. 97-448, Sec. 105(a)(1)(B), substituted 
``Unrecognized gain'' for ``Unrealized gain'' in heading.
    Subsec. (a)(3)(A). Pub. L. 97-448, Sec. 105(a)(1)(B), substituted 
``unrecognized gain'' for ``unrealized gain'' as term defined, 
designated existing definition as cl. (i), and added cl. (ii).
    Subsec. (a)(3)(B)(i)(I). Pub. L. 97-448, Sec. 105(a)(1)(C), 
substituted ``with respect to which, as of the close of the taxable 
year, there is unrecognized gain, and'' for ``which is held by such 
taxpayer as of the close of the taxable year and with respect to which 
there is unrealized gain, and''.
    Subsec. (a)(3)(B)(i)(II). Pub. L. 97-448, Sec. 105(a)(1)(C), 
substituted ``unrecognized gain'' for ``unrealized gain''.
    Subsec. (c)(2)(C). Pub. L. 97-448, Sec. 105(a)(4), substituted 
``subsection (a)(2)(B)'' for ``subsection (a)(3)(B)''.
    Subsec. (d)(4). Pub. L. 97-448, Sec. 105(a)(3), substituted ``a 
straddle at least 1 (but not all) of the positions of which are 
regulated futures contracts, the provisions of this section shall 
apply'' for ``a straddle-- (A) at lease 1 (but not all) of the positions 
of which are regulated futures contracts, and (B) with respect to which 
the taxpayer has elected not to have the provisions of section 1256 
apply, the provisions of this section shall apply''.


                    Effective Date of 1999 Amendment

    Amendment by Pub. L. 106-170 applicable to any instrument held, 
acquired, or entered into, any transaction entered into, and supplies 
held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. 
L. 106-170, set out as a note under section 170 of this title.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable to taxable years beginning 
after Aug. 5, 1997, see section 1271(c) of Pub. L. 105-34, set out as a 
note under section 817 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 applicable with respect to forward 
contracts, future contracts, options, and similar instruments entered 
into or acquired after Oct. 21, 1988, see section 6130(d)(1) of Pub. L. 
100-647, set out as a note under section 988 of this title.


                    Effective Date of 1986 Amendment

    Section 331(b) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [amending this section] shall apply to positions 
established on or after January 1, 1987.''
    Amendment by section 1261(b) of Pub. L. 99-514 applicable to taxable 
years beginning after Dec. 31, 1986, with certain exceptions and 
qualifications, see section 1261(e) of Pub. L. 99-514, set out as an 
Effective Date note under section 985 of this title.
    Amendment by section 1808(c) of Pub. L. 99-514 effective, except as 
otherwise provided, as if included in the provisions of the Tax Reform 
Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, 
see section 1881 of Pub. L. 99-514, set out as a note under section 48 
of this title.


                    Effective Date of 1984 Amendment

    Section 101(e) of Pub. L. 98-369 provided that:
    ``(1) In general.--Except as otherwise provided in this subsection, 
the amendments made by this section [amending this section] shall apply 
to positions established after December 31, 1983, in taxable years 
ending after such date.
    ``(2) Special rule for offsetting position stock.--In the case of 
any stock of a corporation formed or availed of to take positions in 
personal property which offset positions taken by any shareholder, the 
amendments made by this section shall apply to positions established on 
or after May 23, 1983, in taxable years ending on or after such date.
    ``(3) Subsection (c).--The amendment made by subsection (c) 
[amending this section] shall apply to positions established after June 
30, 1984, in taxable years ending after such date.
    ``(4) Subsection (d).--The amendment made by subsection (d) 
[amending this section] shall apply to positions established after the 
date of the enactment of this Act in taxable years ending after such 
date.''
    Amendment by section 102(e)(2) of Pub. L. 98-369 applicable to 
positions established after July 18, 1984, in taxable years ending after 
that date, except as otherwise provided, see section 102(f), (g) of Pub. 
L. 98-369, set out as a note under section 1256 of this title.
    Section 103(b), (c) of Pub. L. 98-369, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(b) Requirement That Regulations Be Issued Within 6 Months After 
the Date of Enactment.--The Secretary of the Treasury or his delegate 
shall prescribe initial regulations under section 1092(b) of the 
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (including 
regulations relating to mixed straddles) not later than the date 6 
months after the date of the enactment of this Act [July 18, 1984].
    ``(c) Effective Date of Regulations With Respect to Mixed 
Straddles.--The regulations described in subsection (b) with respect to 
the application of section 1233 of the Internal Revenue Code of 1986 to 
mixed straddles shall not apply to mixed straddles all of the positions 
of which were established before January 1, 1984.''
    Section 107(e) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section and sections 1236 and 1256 
of this title] shall apply to positions entered into after the date of 
the enactment of this Act [July 18, 1984], in taxable years ending after 
such date.''


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                             Effective Date

    Section 508 of title V of Pub. L. 97-34, as amended by Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(a) In General.--Except as otherwise provided in this section, the 
amendments made by this title [enacting this section and sections 1234A 
and 1256 of this title, amending sections 263, 341, 1212, 1221, 1231, 
1232, 1233, 1236, and 6653 of this title, and enacting provisions set 
out as a note under section 1256 of this title] shall apply to property 
acquired and positions established by the taxpayer after June 23, 1981, 
in taxable years ending after such date.
    ``(b) Identification Requirements.--
        ``(1) Under section 1236 of code.--The amendments made by 
    section 506 [amending section 1236 of this title] shall apply to 
    property acquired by the taxpayer after the date of the enactment of 
    this Act [Aug. 13, 1981] in taxable years ending after such date.
        ``(2) Under section 1256(e)(2)(c) of code.--Section 
    1256(e)(2)(C) of the Internal Revenue Code of 1986 [formerly I.R.C. 
    1954] (as added by this title) shall apply to property acquired and 
    positions established by the taxpayer after December 31, 1981, in 
    taxable years ending after such date.
    ``(c) Election With Respect to Property Held on June 23, 1981.--If 
the taxpayer so elects (at such time and in such manner as the Secretary 
of the Treasury or his delegate shall prescribe) with respect to all 
regulated futures contracts or positions held by the taxpayer on June 
23, 1981, the amendments made by this title shall apply to all such 
contracts and positions, effective for periods after such date in 
taxable years ending after such date. For purposes of the preceding 
sentence, the term `regulated futures contract' has the meaning given to 
such term by section 1256(b) of the Internal Revenue Code of 1986, and 
the term `position' has the meaning given to such term by section 
1092(d)(2) of such Code.''


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.


 Treatment of Certain Losses on Straddles Entered Into Before Effective 
                Date of Economic Recovery Tax Act of 1981

    Section 108 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec. 2, 
title XVIII, Sec. 1808(d), Oct. 22, 1986, 100 Stat. 2095, 2817, provided 
that:
    ``(a) General Rule.--For purposes of the Internal Revenue Code of 
1986 [formerly I.R.C. 1954], in the case of any disposition of 1 or more 
positions--
        ``(1) which were entered into before 1982 and form part of a 
    straddle, and
        ``(2) to which the amendments made by title V of the Economic 
    Recovery Tax Act of 1981 [Pub. L. 97-34, see Effective Date note 
    above] do not apply,
any loss from such disposition shall be allowed for the taxable year of 
the disposition if such loss is incurred in a trade or business, or if 
such loss is incurred in a transaction entered into for profit though 
not connected with a trade or business.
    ``(b) Loss Incurred in a Trade or Business.--For purposes of 
subsection (a), any loss incurred by a commodities dealer in the trading 
of commodities shall be treated as a loss incurred in a trade or 
business.
    ``(c) Net Loss Allowed.--If any loss with respect to a position 
described in paragraphs (1) and (2) of subsection (a) is not allowable 
as a deduction (after applying subsections (a) and (b)), such loss shall 
be allowed in determining the gain or loss from dispositions of other 
positions in the straddle to the extent required to accurately reflect 
the taxpayer's net gain or loss from all positions in such straddle.
    ``(d) Other Rules.--Except as otherwise provided in subsections (a) 
and (c) and in sections 1233 and 1234 of such Code, the determination of 
whether there is recognized gain or loss with respect to a position, and 
the amount and timing of such gain or loss, and the treatment of such 
gain or loss as long-term or short-term shall be made without regard to 
whether such position constitutes part of a straddle.
    ``(e) Straddle.--For purposes of this section, the term `straddle' 
has the meaning given to such term by section 1092(c) of the Internal 
Revenue Code of 1986 as in effect on the day after the date of the 
enactment of the Economic Recovery Tax Act of 1981 [Aug. 13, 1981], and 
shall include a straddle all the positions of which are regulated 
futures contracts.
    ``(f) Commodities Dealer.--For purposes of this section, the term 
`commodities dealer' means any taxpayer who--
        ``(1) at any time before January 1, 1982, was an individual 
    described in section 1402(i)(2)(B) of the Internal Revenue Code of 
    1986 [formerly I.R.C. 1954] (as added by this subtitle), or
        ``(2) was a member of the family (within the meaning of section 
    704(e)(3) of such Code) of an individual described in paragraph (1) 
    to the extent such member engaged in commodities trading through an 
    organization the members of which consisted solely of--
            ``(A) 1 or more individuals described in paragraph (1), and
            ``(B) 1 or more members of the families (as so defined) of 
        such individuals.
    ``(g) Regulated Futures Contracts.--For purposes of this section, 
the term `regulated futures contracts' has the meaning given to such 
term by section 1256(b) of the Internal Revenue Code of 1986 (as in 
effect before the date of enactment of this Act [July 18, 1984]).
    ``(h) Syndicates.--For purposes of this section, any loss incurred 
by a person (other than a commodities dealer) with respect to an 
interest in a syndicate (within the meaning of section 1256(e)(3)(B) of 
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) shall not be 
considered to be a loss incurred in a trade or business.''

                  Section Referred to in Other Sections

    This section is referred to in sections 246, 263, 475, 731, 871, 
988, 1233, 1234B, 1256, 1258, 1259 of this title.
