Bank One Corporation - Page 108

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          Commissioner should defer to the taxpayer’s normal financial                
          accounting valuation, which in the case of a swaps dealer was               
          generally the method that was recommended by the G-30 report.               
          This implication that using financial accounting methods would              
          “alleviate unnecessary compliance burdens” is buttressed by                 
          another part of the legislative history of section 475.  This               
          other part, which relates to the identification of certain                  
          securities as hedges (and not the fair market valuation of                  
          securities), indicates that the use of financial accounting                 
          methods would be an adequate and efficient method for applying              
          mark-to-market rules.  The other part states:                               
                    It is anticipated that the identification rules                   
               with respect to hedges will be applied in such a manner                
               as to minimize the imposition of additional accounting                 
               burdens on dealers in securities.  For example, it is                  
               understood that certain dealers in securities use                      
               accounting systems which treat certain transactions                    
               entered into between separate business units as if such                
               transactions were entered into with unrelated third                    
               parties.  It is anticipated that for the purposes of                   
               the mark-to-market rules, such an accounting system                    
               generally will provide an adequate identification of                   
               hedges with third parties.  [H. Rept. 103-111, supra at                
               664, 1993-3 C.B. at 240.]                                              
               B.   Standard of the Mark-to-Market Method Is Not                      
                    Reasonableness                                                    
               Petitioner argues that FNBC was allowed to use its specific            
          mark-to-market method for purposes of section 475 because,                  
          petitioner asserts, FNBC’s method was “reasonable”.  We disagree            
          with petitioner that the reasonableness of a particular method of           
          accounting is the linchpin of an acceptable method under section            





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