Rules Would Clarify When Derivative Exchanges Occur During Transfers

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IRS issues temporary rules that, if finalized, will clarify that there is no exchange to a nonassigning counterparty under tax code Section 1001 when a securities dealer or clearinghouse transfers or assigns a derivative contract to another dealer or clearinghouse. Temporary and final rules (T.D. 9538) would amend and expand tax code Section 1001 to include derivative contracts other than notional principal contracts. The need to amend that section was increased by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203), which IRS says will necessitate, in some cases, the movement of entire books of derivatives contracts.