Derivative Tax Challenges: Navigating the Changing IRS Rules on the Treatment of Swaps and Futures

Recording of a 110-minute premium CLE/CPE webinar with Q&A

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Conducted on Wednesday, January 22, 2014

Recorded event now available

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Course Materials

This CLE course will prepare tax counsel to address current tax issues specific to derivative financial products.  Our distinguished panel will help tax counsel to identify the issues and explain how to resolve them.

Description

Since the passage of Dodd-Frank, there have been fundamental changes in the derivatives markets that existing tax rules do not address. While the IRS has issued a handful of proposed and final rules on specific topics, current law is a hodgepodge of rules that are difficult to navigate.

The IRS has finally issued new regulations on swap transfers, assignments and novations. The proposed regulations apply IRC Section 1256 to swaps and futures with surprising results. Learn how they also address the application of IRC Section 956 to upfront payments on swaps and the implications in other contexts.

The panel will explain how the proposed regulations additionally expand the scope of the notional principal contract rules. They address the method of accounting which have languished for years. Counsel will also learn how the regulations require derivatives to be marked to market for tax purposes.

Listen as our distinguished panel reviews and explains how the regulations treat derivative financial products. The panel will discuss the new regulations affecting swap transfers, assignments and initial payments and proposed regulations affecting notional principal contract rules and more.

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Outline

  1. New regulations on swap transfers, assignments and novations
    1. Application of IRC Section 1256 to swaps and futures
    2. Application of IRC Section 956 to upfront payments
  2. Notional principal contract rules
    1. Method of accounting
  3. Marked to market rules

Benefits

The panel will review these and other key questions:

  • When is a derivatives contract subject to IRC section 1256 v. traditional accrual rules?
  • When may a taxpayer voluntarily mark a derivatives contract to market?
  • Does the tax treatment of a derivative depend on whether it is cleared through central counterparty or whether it is an over-the-counter transaction?
  • What are the consequences of entering into a swap with an upfront payment?
  • What are the consequences of assigning a derivatives contract?
  • What is the effect of changes in the market and in the tax law on derivatives used for hedging purposes?
  • How might tax reform affect the tax treatment of derivatives?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Mark H. Leeds
Mark H. Leeds
Partner
Mayer Brown

Mr. Leeds is Tax Transactions and Consulting Partner in the firm. His practice is focused on the tax consequences of a...  |  Read More

Erika W. Nijenhuis
Erika W. Nijenhuis
Partner
Cleary Gottlieb

Ms. Nijenhuis' practice focuses on U.S. income tax, with an emphasis on financial products and international tax...  |  Read More

William R. Pomierski
William R. Pomierski
Partner
McDermott Will & Emery

Mr. Pomierski focuses his practice on the taxation of financial products and capital markets transactions. He advises...  |  Read More

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