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Camp Proposes Moving to Mark-to-Market Taxation for Derivatives

Friday, January 25, 2013
Most financial derivatives would be taxed under the mark-to-market accounting treatment in a draft proposal offered by House Ways and Means Chairman Camp. Camp's proposal, issued as a discussion draft intended to solicit input from tax professionals in the financial sector, would also repeal tax code Section 1256 rules that allow securities dealers to pay taxes at long-term capital gains rates on 60 percent of their derivatives income and ordinary income tax rates on the remaining 40 percent. The discussion draft also calls for changing the tax code to simplify business hedging rules, eliminating “phantom” taxes that result from debt restructurings, a provision to ease basis reporting, and tighter rules to prevent wash-sales from occurring.

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