OneChicago gives its two cents
07 May 2015 Chicago
Image: Shutterstock OneChicago has requested guidance from the Internal Revenue Service (IRS) and US Department of the Treasury concerning three issues related to section 1058 of the Internal Revenue Code.
The request has arisen in response to the IRS and Treasury’s invitation for public comment on recommendations for items that should be included on the 2015-2016 Guidance Priority List.
OneChicago has requested guidance on whether a taxpayer who uses an exchange-traded and centrally-cleared derivative, rather than a bilateral, over-the-counter (OTC) derivative, to provide for the return of securities under section 1058 would be eligible for the non-recognition treatment afforded by that section.
Guidance has also been requested regarding whether section 1058 imposes a requirement on all those that transfer securities—organisations and individuals—to be able to reacquire the transferred securities within five days.
Finally, OneChicago has asked for guidance on whether a taxpayer who has transferred securities to a transferee in accordance with the requirements of section 1058 and subsequently executes a hedging transaction with a third party would remain eligible for non-recognition treatment of the initial transfer under section 1058.
The firm commented: “The lack of clarity regarding these three issues has caused market participants to defer moving certain bilateral derivatives activity onto regulated exchanges.”
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