What is a hedged executory contract? A “hedged executory contract” is another type of transaction that is eligible for integration under Code Section 988(d). A hedged executory contract results when a taxpayer enters into an...more
Are there special hedging provisions for section 988 transactions? Yes. In addition to the business hedging rules I address in our earlier Q&A with Andie series, a special hedging provision is available at Code section 988(d)...more
Do the tax hedge rules apply to consolidated tax groups? Yes. The Treasury Regulations treat members of a consolidated corporate group as divisions of a single entity. As a single entity, the risks and positions of all group...more
What are the tax accounting rules for hedges? Whether or not a qualified tax hedge is properly identified, it must be tax accounted for under a method that clearly reflects income. The timing of gains and losses on hedges...more
When must a hedge be identified and accounted for tax purposes? Taxpayers must identity each hedging transaction and the item it hedges. A taxpayer must clearly identify a hedging transaction “before the close of the day on...more
What is the “tax character” of a hedge? A taxpayer receives ordinary gain or loss on qualified hedges that have been properly identified in accordance with Treasury Regulation § 1.1221-2. This allows a taxpayer to ensure that...more