-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,Page: Previous 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 Next
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