Bank One Corporation - Page 106

                                        -187-                                         
                    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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