IRS: Taxpayers Can't Claim Gains, Losses Before Identified Mixed Straddles

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The Internal Revenue Service issued final rules maintaining its stance that taxpayers can't claim gains or losses on positions taken in mixed straddles before the straddle actually happens—an approach drawing disappointment from the insurance industry.
The July 17 rules (T.D. 9678, RIN 1545-BK99) will affect insurance companies because they own a lot of bonds, said Peter Bautz, vice president for taxes and retirement security for the American Council of Life Insurers. Under the previous rules, insurance companies could trigger gain on their bonds without permanently losing the associated capital losses for tax purposes.
A straddle is an investment strategy involving the purchase or sale of particular option derivatives that allows the holder to profit based on how much the price of the underlying security moves. A “mixed straddle” is a combination of positions in futures contracts with offsetting gains and losses.