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trader uses the same method of valuing those
instruments on its income tax return;
(3) The dealer or trader and all persons
related to the dealer or trader within the
meaning of sections 267(b) and 707(b)(1)
account for the securities and commodities
that they hold in their capacity as dealers
or traders (or as hedges or such securities
or commodities) on their income tax returns
either on the basis of cost or on the basis
of market value, but not at the lower of cost
or market value;
(4) A description of the methods
employed to value each class of derivative
financial instruments is attached to the
dealer’s or trader’s income tax return for
each year; and
(5) The method elected under this
section is used consistently in subsequent
years, unless another method is authorized by
the Commissioner pursuant to a written
request under � 1.446-1(e) of the
regulations. [Id.]
Whereas the enactment of section 475 rendered moot any final
action on the relevant part of these proposed regulations, the
Treasury Department, in the end, never did finalize these rules.
The legislative history of section 475 itself indicates that
Congress anticipated that a taxpayer could use mark-to-market
accounting to comply with section 475. The history of section
475 establishes that Congress was well aware of how mark-to-
market accounting operated in practice in the swaps industry and
that Congress constructed section 475 in light of that current
practice. In fact, the first legislative proposal for what
became section 475, contained in the President’s Budget Proposal,
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