Withholding on Derivatives Is Postponed

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The Internal Revenue Service has postponed for one year the effective date for withholding on so-called "dividend equivalent payments" made on notional principal contracts. As a result, for most notional principal contracts, withholding will not be required prior to January 1, 2014. The postponement is intended to allow investment banks and other financial institutions sufficient time to develop the systems needed to implement the withholding rules.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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