- 5 - Section 165(a) generally allows a deduction for any loss sustained during the taxable year and not compensated for by insurance or otherwise. Section 165(f) states that losses from sales or exchanges of capital assets shall be allowed only to the extent allowed in section 1211 and 1212, which set forth limitations on capital losses. A "capital asset" is defined as "property held by the taxpayer", but there are several exceptions to the general rule. Sec. 1221. During the year in issue, none of the exceptions addressed futures contracts. Sec. 1221. (Section 1221 was amended by adding subsection 7 which excludes clearly identified hedging transactions from the definition of capital asset, effective for any transaction entered into on or after December 17, 1999. Ticket to Work and Work Incentives Improvement Act of 1999, Pub. L. 106-170, sec. 532(a)(3), 113 Stat. 1928). Because commodity futures contracts were not specifically excluded, they generally are treated as capital assets. See generally Arkansas Best Corp. v. Commissioner, 485 U.S. 212 (1988); Myers v. Commissioner, T.C. Memo. 1986-518. Section 1233(a) specifically provides that gain or loss from short sales of commodity futures shall be treated as gain or loss from the sale of a capital asset. However, section 1233(g) states that section 1233(a) shall not apply in the case of a hedging transaction in commodity futures.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011