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similar financial instrument in
such a security or currency; and
(F) position which--
(i) is not a
security described in
subparagraph (A), (B),
(C), (D), or (E),
(ii) is a hedge with
respect to such a
security, and
(iii) is clearly
identified in the
dealer’s records as being
described in this
subparagraph before the
close of the day on which
it was acquired or
entered into (or such
other time as the
Secretary may by
regulations prescribe).
Subparagraph (E) shall not include any
contract to which section 1256(a) applies.
(3) Hedge.--The term “hedge” means any
position which reduces the dealer’s risk of
interest rate or price changes or currency
fluctuations, including any position which is
reasonably expected to become a hedge within
60 days after the acquisition of the
position.
(d) Special Rules.--For purposes of this section--
(1) Coordination with certain rules.--The rules of
sections 263(g), 263A, and 1256(a) shall not apply to
securities to which subsection (a) applies, and section
1091 shall not apply (and section 1092 shall apply) to
any loss recognized under subsection (a).
(2) Improper identification.--If a taxpayer--
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