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Legal Update

Do What I Say, Not What I Do: The US Internal Revenue Service Finalizes Changes to the Mixed Straddle Rules

21 July 2014
Mayer Brown Legal Update
In 1981, when Congress enacted the straddle rules preventing selective loss recognition, it directed the IRS to allow taxpayers to recognize built-in gain and loss on mixed straddles. In response, the IRS wrote regulations that permit such gain and loss recognition. The IRS has changed its view and rewrote the regulation to prohibit taxpayers entering into mixed straddles from recognizing built-in losses beginning on August 16, 2014. Other tax rules, however, will require the recognition of built-in gains. All trading enterprises, but the insurance industry in particular, is likely to affected by this change. Taxpayers desiring to take advantage of the current rules must act quickly.


  • Mark H. Leeds
    T +1 212 506 2499
  • James R. Barry
    T +1 312 701 7169
  • George W. Craven
    T +1 312 701 7231

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