As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, certain books of derivative contracts must be transferred to other dealers.

For US federal income tax purposes, gain or loss is recognised upon the exchange of property for other property differing materially either in kind or extent. Therefore, the non-assigning counter-party to any derivative contracts subject to a transfer may be treated as recognising gain or loss.

Since existing US Treasury regulations only address the transfer and assignment of derivatives that qualify as “notional principal contracts” for US federal income tax purposes, many in the public domain have commented that such regulations were too narrowly drawn, especially for the post-Dodd Frank world.