,,ii #aagth ,,congress #ast ,session ,s4 #bfba ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,august #e1 #bjba,mr4 ,wyden introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to modernize the tax treatment of derivatives and their underlying investments1 and for other purposes4 #a4 ,short title 7a7 ,short title ,this ,act may be cited as the ,modernization of ,derivatives ,tax ,act of #bjba4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 #b4 ,modernization of tax treatment of certain derivatives 7a7 ,in ,general ,subchapter ,e of chapter #a is amended by adding at the end the following new part3 ,,iv ,tax treatment of derivatives and similar contracts ,subpart ,a4 ,derivatives,subpart ,b4 ,similar contracts ,a ,derivatives ,sec4 #dia4 ,rules for treatment of derivatives4,sec4 #dib4 ,investment hedging units4,sec4 #dic4 ,derivative defined4 #dia4 ,rules for treatment of derivatives 7a7 ,in general ,for purposes of this title1 if there is a taxable event with respect to a derivative or an underlying investment-- 7#a7 notwithstanding any other provision of this title1 except as provided in subsection 7b77#c77;,a7 or section #ajcb1 gain or loss shall be recognized and taken into account in the taxable year in which the taxable event occurs1 and 7#b7 proper adjustment shall be made in the amount of any subsequent gain or loss for gain or loss taken into account by reason of paragraph 7#a74 7b7 ,rules relating to gain or loss ,notwithstanding any other provision of this title-- 7#a7 ,character and source of gain or loss 7,a7 ,character ,except as provided in paragraph 7#c77;,a71 any item of income1 deduction1 gain1 or loss taken into account under subsection 7a7 with respect to a taxable event shall be treated as-- 7i7 ordinary income or loss1 and 7ii7 attributable to a trade or business of the taxpayer for purposes of sections #fb7;a7 and #agb7;d77#d74 7,b7 ,source of gain or loss from derivatives ,in the case of a taxable event with respect to a derivative1 any item of income1 deduction1 gain1 or loss taken into account under subsection 7a7 shall be treated as derived from sources within the country of residence1 incorporation1 or organization of the taxpayer4 7#b7 ,determination of amount 7,a7 ,in general ,the amount of gain or loss taken into account under subsection 7a7 with respect to a taxable event shall be-- 7i7 in the case of a taxable event involving the termination or transfer of a derivative or the sale or exchange of an underlying investment1 the amount of gain or loss determined under this title with respect to the taxable event1 or 7ii7 in the case of any other taxable event1 the amount of gain or loss which would be determined under this title if1 immediately before the taxable event-- 7,i7 in the case of a derivative1 the derivative were terminated or transferred at its fair market value1 or 7,,ii7 in the case of an underlying investment1 the investment were sold or exchanged at its fair market value4 7,b7 ,reliance on valuation ,for purposes of subparagraph 7,a71 the taxpayer may rely on a valuation which is-- 7i7 provided to the taxpayer by a broker under section #fjde7;b71 or 7ii7 determined under an applicable financial statement4 7#c7 ,special rules for taxable events with respect to investment hedging units 7,a7 ,in general ,in the case of a taxable event described in subsection 7c77#b7 with respect to a derivative or underlying investment 7other than a termination or transfer of the derivative or the sale or exchange of the underlying investment7-- 7i7 notwithstanding subsection 7a71 built-in loss 7if any7 with respect to the derivative or underlying investment shall not be recognized and shall not be taken into account by reason of such taxable event1 and 7ii7 notwithstanding paragraph 7#a71 built-in gain 7if any7 with respect to the underlying investment shall be treated as long-term or short-term capital gain if the built-in gain would have been so treated if the investment were sold or exchanged at its fair market value immediately before the time that the built-in gain is determined under subparagraph 7,d74 7,b7 ,identification ,for purposes of this paragraph1 the determination of which portions of an underlying investment have been deemed sold or exchanged in a taxable event shall be made in the same manner as if there had been an actual sale or exchange4 7,c7 ,built-in loss ,for purposes of this section1 the term built-in loss means1 with respect to any derivative or underlying investment in an investment hedging unit1 any loss which would have been recognized and taken into account under subsection 7a7 if the derivative were terminated or transferred1 or the underlying investment were sold or exchanged1 at its fair market value as of the later of the time that the investment hedging unit was established or the time that the derivative or the underlying investment became part of the investment hedging unit4 7,d7 ,built-in gain ,for purposes of this section1 the term built-in gain means1 with respect to any underlying investment in an investment hedging unit1 any gain which would have been recognized and taken into account under subsection 7a7 if the underlying investment were sold or exchanged at its fair market value as of the later of the time that the investment hedging unit was established or the time that the underlying investment became part of the investment hedging unit4 7c7 ,taxable event ,for purposes of this part1 the term taxable event means-- 7#a7 with respect to any derivative which is not part of an investment hedging unit-- 7,a7 the termination or transfer of such derivative1 and 7,b7 the close of any taxable year if the taxpayer has rights or obligations with respect to such derivative at such time1 and 7#b7 with respect to all derivatives and underlying investments which are part of the same investment hedging unit-- 7,a7 the establishment of the investment hedging unit1 7,b7 the termination or transfer of any such derivative1 7,c7 the sale or exchange of all or any portion of any such underlying investment1 7,d7 the entering into of another derivative1 or the acquisition of an additional amount of such underlying investment1 after the establishment of the investment hedging unit if such derivative or additional amount is treated as part of the investment hedging unit under section #dib1 and 7,e7 in the case of-- 7i7 an investment hedging unit with respect to which an election is in effect under section #dib7;b71 the close of each business day1 and 7ii7 any other investment hedging unit1 the close of any taxable year if the applicable hedging period with respect to such unit includes such close4 7#c7 ,termination or transfer ,for purposes of this part1 the term termination or transfer includes1 with respect to any derivative1 any termination or transfer by offsetting1 by taking or making delivery1 by exercise or being exercised1 by assignment or being assigned1 by lapse1 by sale or other disposition1 by assumption1 or otherwise4 7d7 ,treatment of payments with respect to certain derivatives ,notwithstanding any other provision of this title-- 7#a7 ,in general ,except as provided by the ,secretary1 in the case of a payment pursuant to a derivative 7other than an option7-- 7,a7 any item of income1 deduction1 gain1 or loss with respect to the payment shall be taken into account for purposes of this title at the time of the payment1 and 7,b7 proper adjustment shall be made in the amount of any subsequent gain or loss for items taken into account by reason of subparagraph 7,a74 ,this paragraph shall not apply to a payment in connection with a taxable event4 7#b7 ,rules relating to character and source of gain or loss ,in the case of any item of income1 deduction1 gain1 or loss with respect to payments described in paragraph 7#a7-- 7,a7 the rules of subsection 7b77#a77;,a7 shall apply in determining the character of such item1 and 7,b7 except as provided in section #hga7m71 the rule of subsection 7b77#a77;,b7 shall apply in determining the source of such item4 7e7 ,suspension of holding period while underlying investment part of investment hedging unit ,for purposes of section #abbb1 in the case of any underlying investment which is part of an investment hedging unit1 the holding period for such investment shall not include any period during which the underlying investment is part of such unit4 7f7 ,applicable financial statement ,for purposes of this part1 the term applicable financial statement means-- 7#a7 a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is-- 7,a7 a #aj-,k 7or successor form71 or annual statement to shareholders1 required to be filed by the taxpayer with the ,united ,states ,securities and ,exchange ,commission1 7,b7 an audited financial statement of the taxpayer which is used for-- 7i7 credit purposes1 7ii7 reporting to shareholders1 partners1 or other proprietors1 or to beneficiaries1 or 7iii7 any other substantial nontax purpose1 but only if there is no statement of the taxpayer described in subparagraph 7,a71 or 7,c7 filed by the taxpayer with any other ,federal agency for purposes other than ,federal tax purposes1 but only if there is no statement of the taxpayer described in subparagraph 7,a7 or 7,b71 7#b7 a financial statement which is made on the basis of international financial reporting standards and is filed by the taxpayer with an agency of a foreign government which is equivalent to the ,united ,states ,securities and ,exchange ,commission and which has reporting standards not less stringent than the standards required by such ,commission1 but only if there is no statement of the taxpayer described in paragraph 7#a71 or 7#c7 a financial statement filed by the taxpayer with any other regulatory or governmental body specified by the ,secretary1 but only if there is no statement of the taxpayer described in paragraph 7#a7 or 7#b74 #dib4 ,investment hedging units 7a7 ,investment hedging unit ,for purposes of this part-- 7#a7 ,in general ,except as provided in subsection 7b7-- 7,a7 a taxpayer shall be treated as having an investment hedging unit with respect to an underlying investment during any applicable hedging period with respect to the underlying investment1 and 7,b7 subject to paragraph 7#c71 such investment hedging unit shall at any time during the applicable hedging period consist of the following held by the taxpayer at such time3 7i7 ,each derivative with respect to the underlying investment which has a delta with respect to any portion of the underlying investment which is within the range beginning with minus #j4g and ending with minus #a4j4 7ii7 ,each portion of the underlying investment described in clause 7i7 with respect to which any derivative has a delta within the range described in clause 7i74 7#b7 ,applicable hedging period ,the term applicable hedging period means1 with respect to any underlying investment of a taxpayer1 a continuous period-- 7,a7 beginning with the first time 7after a period which is not an applicable hedging period7 the taxpayer holds #a or more of the derivatives with respect to the underlying investment1 and #a or more portions of the underlying investment1 which are described in paragraph 7#a77;,b71 and 7,b7 ending with the time none of such derivatives and portions are so described4 7#c7 ,special rules relating to delta and combining derivatives 7,a7 ,in general ,for purposes of this subsection-- 7i7 a derivative with respect to an underlying investment shall be treated as having a delta within the range described in paragraph 7#a77;,b77i7 if the derivative by itself1 or in combination with #a or more other derivatives1 has such delta with respect to any portion of such underlying investment1 and 7ii7 the determination under paragraph 7#a77;,b7 of which derivatives have such delta1 and each portion of the underlying investment with respect to which such derivatives have such delta1 shall be made in the manner which results in the largest portion of such underlying investment being so described4 7,b7 ,secretarial authority for applicable traded derivatives ,the ,secretary may prescribe regulations or other guidance to modify the rules under subparagraph 7,a7 to simplify the application of such rules to applicable traded derivatives4 7#d7 ,applicable traded derivatives ,for purposes of paragraph 7#c7-- 7,a7 ,in general ,the term applicable traded derivative means any listed option or regulated futures contract4 7,b7 ,regulated futures contract ,the term regulated futures contract means a contract-- 7i7 with respect to which the amount required to be deposited and the amount which may be withdrawn depends on a system of marking to market1 and 7ii7 which is traded on 7or subject to the rules of7 a qualified board or exchange4 7,c7 ,listed option ,the term listed option means any option 7other than a right to acquire stock from the issuer7 which is traded on 7or subject to the rules of7 a qualified board or exchange4 7,d7 ,qualified board or exchange ,the term qualified board or exchange means-- 7i7 a national securities exchange which is registered with the ,securities and ,exchange ,commission1 7ii7 a domestic board of trade designated as a contract market by the ,commodity ,futures ,trading ,commission1 or 7iii7 any other exchange1 board of trade1 or other market which the ,secretary determines has rules adequate to carry out the purposes of this part4 7b7 ,election with respect to items included in investment hedging unit 7#a7 ,in general ,for purposes of this part1 a taxpayer may elect to treat all derivatives with respect to an underlying investment1 and all of such underlying investment1 as part of an investment hedging unit4 7#b7 ,election ,any election under this subsection with respect to an underlying investment-- 7,a7 shall apply to all derivatives with respect to such underlying investment1 and all of such underlying investment1 held at any time after the election is made 7including during any period such derivatives or underlying investment are not held simultaneously71 and 7,b7 shall be irrevocable4 7#c7 ,deemed election for taxpayers failing to identify 7,a7 ,in general ,if a taxpayer-- 7i7 does not have an election in effect under paragraph 7#a7 with respect to an underlying investment1 and 7ii7 fails to meet the requirements of subsection 7c7 for testing and identifying derivatives with respect to the underlying investment1 the taxpayer shall be treated as having made the election under paragraph 7#a74 7,b7 ,treatment of election ,for purposes of paragraph 7#b71 a deemed election under this paragraph-- 7i7 shall be treated as made as of the first time the taxpayer fails to meet the requirements of subsection 7c7 with respect to the underlying investment1 and 7ii7 notwithstanding paragraph 7#b77;,b71 may be revoked with the consent of the ,secretary4 7c7 ,definitions and rules relating to taxpayers identifying investment hedging units ,in the case of a taxpayer with respect to which an election is not in effect under subsection 7b7 with respect to an underlying investment-- 7#a7 ,in general ,the taxpayer shall1 at the times described in paragraph 7#c71 test the derivatives with respect to the underlying investment and make the identifications described in paragraph 7#b74 7#b7 ,identification 7,a7 ,in general ,the taxpayer shall identify the following with respect to an underlying investment3 7i7 ,each derivative described in subsection 7a77#a77;,b77i74 7ii7 ,each portion of the underlying investment described in subsection 7a77#a77;,b77ii74 7,b7 ,derivatives and underlying investment not part of investment hedging unit ,a taxpayer shall identify the derivatives with respect to an underlying investment1 and the portions of the underlying investment1 which are not required to be identified under subparagraph 7,a74 7,c7 ,portion may include all of underlying investment ,for purposes of this part1 the term portion with respect to any underlying investment identified may include all of the underlying investment4 7#c7 ,times identifications required to be made 7,a7 ,in general ,the taxpayer shall test and make the identifications required under this subsection at the following times during any continuous period the taxpayer simultaneously holds #a or more derivatives with respect to an underlying investment and #a or more portions of the underlying investment3 7i7 ,the beginning of the period4 7ii7 ,immediately after the taxpayer 7during such period7-- 7,i7 enters into another derivative with respect to the underlying investment or acquires an additional amount of such underlying investment1 or 7,,ii7 terminates or transfers #a or more derivatives with respect to the underlying investment or sells or exchanges any portion of the underlying investment1 except that no testing and identification shall be required under this subclause with respect to any such transaction if the taxpayer does not have an investment hedging unit with respect to the underlying investment immediately before such transaction4 7iii7 ,such other times during such period as the ,secretary may prescribe by regulations or other guidance4 7,b7 ,no other times for testing ,except as provided by the ,secretary1 there shall not be taken into account for purposes of this part any testing and identification done by the taxpayer with respect to an underlying investment at a time other than the times required under subparagraph 7,a74 7#d7 ,manner ,a taxpayer shall be treated as timely making the identifications required under this subsection if the derivatives with respect to1 and each portion of1 an underlying investment are clearly identified as part of 7or as not part of7 the investment hedging unit for purposes of this paragraph before the close of the day on which the identification is required 7or such other time as the ,secretary may prescribe74 7#e7 ,treatment of incorrect identification ,the ,secretary shall prescribe regulations or other guidance to properly characterize any income1 gain1 expense1 or loss arising from any derivative or underlying investment which is incorrectly identified under paragraph 7#b7 as being part of1 or not being part of1 an investment hedging unit4 7d7 ,delta ,for purposes of this section-- 7#a7 ,in general ,the term delta means1 with respect to any derivative and underlying investment1 the ratio of the expected change in the fair market value of the derivative to a very small change in the fair market value of the underlying investment4 7#b7 ,method of determination ,the delta with respect to any derivative with respect to an underlying investment 7or any combination of such derivatives7 shall be determined-- 7,a7 in a commercially reasonable manner1 and 7,b7 except as provided by the ,secretary1 in a manner which is consistent with the manner used by the taxpayer or the taxpayer's broker for purposes of an applicable financial statement4 7#c7 ,time for making determination ,the delta with respect to any derivative and underlying investment shall be determined as of any date the taxpayer is required to make the identifications described in subsection 7c74 7#d7 ,multiple underlying investments 7,a7 ,in general ,except as provided in subparagraph 7,b71 if the value of a derivative is determined by reference to more than #a underlying investment1 the delta shall be determined separately with respect to each underlying investment4 7,b7 ,methods for combinations of underlying investments ,the ,secretary may provide methods for determining the delta of any derivative with respect to combinations of #b or more underlying investments4 7e7 ,other definitions and rules ,for purposes of this part-- 7#a7 ,underlying investment 7,a7 ,in general ,the term underlying investment means1 with respect to any derivative1 any item-- 7i7 which is described in any of the paragraphs 7#a7 through 7#h7 of section #dic7;a7 7or any item substantially the same as any such item71 and 7ii7 by reference to which the value of the derivative1 or any payment or other transfer with respect to the derivative1 is determined either directly or indirectly4 7,b7 ,coordination with section #dge ,in the case of a dealer in securities to which section #dge applies 7and a dealer in commodities with respect to which an election is in effect under section #dge7;e771 such term shall not include any item which1 but for this subparagraph1 would be treated as an underlying investment if such item is treated as a security under section #dge 7including a commodity treated as a security under section #dge7;e774 7,c7 ,indirect determinations ,for purposes of subparagraph 7,a77ii71 the value of1 or any payment or other transfer with respect to1 a derivative shall not be treated as indirectly determined by reference to one or more of the items described in paragraphs 7#a7 through 7#h7 of section #dic7;a7 solely because the change in a variable affecting such value1 payment1 or other transfer also affects the value1 level1 amount1 or calculation of such item or items4 7#b7 ,establishment of investment hedging unit ,a taxpayer shall be treated as having established an investment hedging unit with respect to an underlying investment-- 7,a7 in the case of a taxpayer with an election in effect under subsection 7b7 with respect to the underlying investment1 as of the date the election takes effect1 and 7,b7 in the case of any other taxpayer1 as of the beginning of each applicable hedging period with respect to the underlying investment4 7#c7 ,related parties1 etc ,for purposes of this section-- 7,a7 ,attribution between related persons ,any derivative or underlying investment held by a related party 7within the meaning of subsection 7f77 with respect to the taxpayer shall be treated as held by the taxpayer4 7,b7 ,certain pass-through entities ,if part or all of the income1 gain1 loss1 or expense with respect to a derivative or underlying investment held by a partnership1 trust1 or other entity would properly be taken into account for purposes of this chapter by the taxpayer1 then1 except to the extent otherwise provided by the ,secretary1 such derivative or investment shall be treated as held by the taxpayer4 7,c7 ,stock and debt whose value primarily determined by reference to other items ,except as provided by the ,secretary1 if the taxpayer holds an item described in paragraph 7#a7 or 7#c7 of section #dic7;a7 the value of which1 or with respect to which any payment or other transfer1 is primarily determined by reference to one or more other items described in paragraphs 7#a7 through 7#h7 of section #dic7;a71 then1 solely for purposes of this subpart1 such item described in paragraph 7#a7 or 7#c7 of section #dic7;a7 shall also be treated as if it were such other item4 7f7 ,related party ,for purposes of this section-- 7#a7 ,in general ,a person is a related party to the taxpayer if1 with respect to any period during which a derivative or underlying investment is held by such person1 such person-- 7,a7 is the taxpayer's spouse1 7,b7 is a dependent of the taxpayer or any other taxpayer with respect to whom the taxpayer is a dependent1 7,c7 is an individual1 corporation1 partnership1 trust1 or estate which controls1 or is controlled by 7within the meaning of section #ied7;d77#c771 the taxpayer or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer 7or any combination thereof71 7,d7 is an individual retirement plan1 ,archer ,,msa 7as defined in section #bbj7;d771 or health savings account 7as defined in section #bbc7;d771 of the taxpayer or of any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer1 7,e7 is an account under a qualified tuition program described in section #ebi1 an ,,able account 7as defined in section #ebi;,a7e77#f771 or a ,coverdell education savings account 7as defined in section #ecj7;b77 if the taxpayer1 or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer1 is the designated beneficiary of such account or has the right to make any decision with respect to the investment of any amount in such account1 7,f7 is an account under-- 7i7 a plan described in section #dja7;a71 7ii7 an annuity plan described in section #djc7;a71 7iii7 an annuity contract described in section #djc7;b71 or 7iv7 an eligible deferred compensation plan described in section #deg7;b7 and maintained by an employer described in section #deg7;e77#a77;,a71 if the taxpayer or any individual described in subparagraph 7,a7 or 7,b7 with respect to the taxpayer has the right to make any decision with respect to the investment of any amount in such account1 or 7,g7 files a consolidated return 7within the meaning of section #aeja7 with the taxpayer for any taxable year which includes a portion of such period4 7#b7 ,determination of marital status 7,a7 ,in general ,except as provided in subparagraph 7,b71 marital status shall be determined under section #ggjc4 7,b7 ,special rule for married individuals filing separately and living apart ,a husband and wife who-- 7i7 file separate returns for any taxable year1 and 7ii7 live apart at all times during such taxable year1 shall not be treated as married individuals4 7g7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out this section1 including regulations or guidance which require in appropriate cases a taxpayer to bifurcate derivatives described in subsection 7d77#d7 for purposes of applying this part or which may be necessary to prevent the avoidance of the purposes of subsection 7f7 7including treating persons as related parties if such persons are formed or availed of to avoid the purposes of such subsection74 #dic4 ,derivative defined 7a7 ,in general ,for purposes of this part1 except as otherwise provided in this section1 the term derivative means any contract 7including any option1 forward contract1 futures contract1 short position1 swap1 or similar contract7 the value of which1 or any payment or other transfer with respect to which1 is 7directly or indirectly7 determined by reference to one or more of the following3 7#a7 ,any share of stock in a corporation4 7#b7 ,any partnership or beneficial ownership interest in a partnership or trust4 7#c7 ,any evidence of indebtedness4 7#d7 ,except as provided in subsection 7b77#a71 any real property4 7#e7 ,any commodity which is actively traded 7within the meaning of section #ajib7;c77#d774 7#f7 ,any currency4 7#g7 ,any rate1 price1 amount1 index1 formula1 or algorithm4 7#h7 ,any other item which the ,secretary may prescribe4 ,except as provided by the ,secretary to prevent the avoidance of the purposes of this part1 such term shall not include any item described in paragraphs 7#a7 through 7#h74 ,for purposes of this subsection1 the value of1 or any payment or other transfer with respect to1 a contract shall not be treated as indirectly determined by reference to one or more of the items described in paragraphs 7#a7 through 7#h7 solely because the change in a variable affecting such value1 payment1 or other transfer also affects the value1 level1 amount1 or calculation of such item or items4 7b7 ,exceptions 7#a7 ,certain real property 7,a7 ,in general ,for purposes of this part1 the term derivative shall not include any contract with respect to interests in real property 7as defined in section #hef7;c77#e77;,c77 if such contract requires physical delivery of such real property4 7,b7 ,options to settle in cash 7i7 ,in general ,for purposes of subparagraph 7,a71 a contract which provides for an option of cash settlement shall not be treated as requiring physical delivery of real property unless the option is exercisable only in unusual and exceptional circumstances4 7ii7 ,option of cash settlement ,for purposes of clause 7i71 a contract provides an option of cash settlement if the contract settles in 7or could be settled in7 cash or property other than the underlying real property4 7#b7 ,hedging transactions 7,a7 ,in general ,for purposes of this part1 the term derivative shall not include any contract which is part of a hedging transaction 7as defined in section #abba7;b774 7,b7 ,section #ihh hedging transactions ,for exception for section #ihh hedging transactions1 see section #ihh7;d77#a74 7#c7 ,securities lending1 sale-repurchase1 and similar financing transactions ,to the extent provided by the ,secretary1 for purposes of this part1 the term derivative shall not include the right to the return of the same or substantially identical securities transferred in a securities lending transaction1 sale-repurchase transaction1 or similar financing transaction4 7#d7 ,options received in connection with the performance of services ,for purposes of this part1 the term derivative shall not include any option described in section #hc7;e77#c7 received in connection with the performance of services4 7#e7 ,insurance1 annuity1 and endowment contracts ,for purposes of this part1 the term derivative shall not include any insurance1 annuity1 or endowment contract issued by an insurance company to which subchapter ,l applies 7or issued by any foreign corporation to which such subchapter would apply if such foreign corporation were a domestic corporation74 7#f7 ,derivatives with respect to stock of members of same worldwide affiliated group 7,a7 ,in general ,for purposes of this part1 the term derivative shall not include any derivative 7determined without regard to this paragraph7 with respect to stock issued by any member of the same worldwide affiliated group in which the taxpayer is a member4 7,b7 ,worldwide affiliated group ,for purposes of this paragraph1 the term worldwide affiliated group means a group consisting of-- 7i7 the includible members of an affiliated group 7as defined in section #aejd7;a71 determined without regard to paragraph 7#b7 of section #aejd7;b771 and 7ii7 all controlled foreign corporations in which such members in the aggregate meet the ownership requirements of section #aejd7;a77#b7 either directly or indirectly through applying paragraph 7#b7 of section #ieh7;a7 or through applying rules similar to the rules of such paragraph to stock owned directly or indirectly by domestic partnerships1 trusts1 or estates4 7#g7 ,commodities used in normal course of trade or business ,for purposes of this part1 the term derivative shall not include any contract with respect to any commodity if-- 7,a7 such contract requires physical delivery with the option of cash settlement only in unusual and exceptional circumstances1 and 7,b7 such commodity is used 7and is used in quantities with respect to which such derivative relates7 in the normal course of the taxpayer's trade or business 7or1 in the case of an individual1 for personal consumption74 7c7 ,contracts with embedded derivative components 7#a7 ,in general ,if a contract has derivative and nonderivative components1 then each derivative component shall be treated as a derivative for purposes of this part4 ,if the derivative component cannot be separately valued1 then the entire contract shall be treated as a derivative for purposes of this part4 7#b7 ,exception for certain embedded derivative components of debt instruments ,a debt instrument shall not be treated as having a derivative component merely because-- 7,a7 such debt instrument is denominated in a nonfunctional currency 7as defined in section #ihh7;c77#a77;,c77ii771 or 7,b7 payments with respect to such debt instrument are determined by reference to the value of a nonfunctional currency 7as so defined74 7d7 ,treatment of ,american ,depository ,receipts and similar instruments ,except as otherwise provided by the ,secretary1 for purposes of this part1 ,american depository receipts 7and similar instruments7 with respect to shares of stock in foreign corporations shall be treated as shares of stock in such foreign corporations4 ,b ,similar contracts ,sec4 #did4 ,tax treatment of contracts similar to derivatives4 #did4 ,tax treatment of contracts similar to derivatives 7a7 ,in general ,for purposes of this title1 if there is a taxable transaction with respect to any applicable property interest1 then1 notwithstanding any other provision of this title other than section #ajcb1 gain or loss attributable to the taxable transaction shall be considered gain or loss from the sale or exchange of property which has the same character as the property to which the applicable property interest relates has 7or would have7 in the hands of the taxpayer4 7b7 ,definitions ,for purposes of this section-- 7#a7 ,applicable property interest ,the term applicable property interest means any right or obligation with respect to property other than-- 7,a7 a derivative 7as defined in section #dic71 or 7,b7 any position in applicable property to which section #ajib applies4 7#b7 ,taxable transaction ,the term taxable transaction means1 with respect to any applicable property interest-- 7,a7 any termination or transfer 7as defined in section #dia7;c77#c77 of such interest1 or 7,b7 any payment in fulfillment or partial fulfillment of such interest4 4 #c4 ,coordination of new rules with existing rules 7a7 ,coordination with rules for dealers and traders 7#a7 ,derivatives not treated as securities ,section #dge7;c77#b7 is amended-- 7,a7 by adding and at the end of subparagraph 7,c71 7,b7 by striking subparagraphs 7,d7 and 7,e7 and by redesignating subparagraph 7,f7 as subparagraph 7,d71 7,c7 by striking subparagraph 7,a71 7,b71 7,c71 7,d71 or 7,e7 in subparagraph 7,d77i71 as so redesignated1 and inserting subparagraph 7,a71 7,b71 or 7,c71 and 7,d7 by amending the last sentence to read as follows3 ,such term shall not include any derivative to which section #dia7;a7 applies44 7#b7 ,derivatives not treated as commodities ,section #dge7;e77#b7 is amended-- 7,a7 by adding and at the end of subparagraph 7,a71 7,b7 by striking subparagraphs 7,b7 and 7,c7 and by redesignating subparagraph 7,d7 as subparagraph 7,b71 and 7,c7 by striking subparagraph 7,a71 7,b7 or 7,c7 in subparagraph 7,b77i71 as so redesignated1 and inserting subparagraph 7,a74 7#c7 ,conforming amendments 7,a7 ,section #dge7;b7 is amended by striking paragraph 7#d74 7,b7 ,section #dge7;d77#b77;,b7 is amended-- 7i7 by striking subsection 7c77#b77;,f77iii7 and inserting subsection 7c77#b77;,d77iii71 and 7ii7 by striking subsection 7c77#b77;,f7 and inserting subsection 7c77#b77;,d74 7,c7 ,section #dge7;f77#a77;,d7 is amended by striking subsections 7b77#d7 and 7d7 and inserting subsection 7d74 7b7 ,coordination with straddle rules 7#a7 ,in general ,section #ajib is amended to read as follows3 #ajib4 ,straddles 7a7 ,recognition of loss in case of straddles1 etc 7#a7 ,limitation on recognition of loss 7,a7 ,in general ,any loss with respect to #a or more positions shall be taken into account for any taxable year only to the extent that the amount of such loss exceeds the unrecognized gain 7if any7 with respect to #a or more positions which were offsetting positions with respect to #a or more positions from which the loss arose4 7,b7 ,carryover of loss ,any loss which may not be taken into account under subparagraph 7,a7 for any taxable year shall1 subject to the limitations under subparagraph 7,a71 be treated as sustained in the succeeding taxable year4 7#b7 ,unrecognized gain ,for purposes of this subsection-- 7,a7 ,in general ,the term unrecognized gain means-- 7i7 in the case of any position held by the taxpayer as of the close of the taxable year1 the amount of gain which would be taken into account with respect to such position if such position were sold on the last business day of such taxable year at its fair market value1 and 7ii7 in the case of any position with respect to which1 as of the close of the taxable year1 gain has been realized but not recognized1 the amount of gain so realized4 7,b7 ,reporting of gain ,each taxpayer shall disclose to the ,secretary1 at such time and in such manner and form as the ,secretary may prescribe-- 7i7 each position 7whether or not part of a straddle7 with respect to which1 as of the close of the taxable year1 there is unrecognized gain1 and 7ii7 the amount of such unrecognized gain4 ,the ,secretary may waive the requirement to report under this subparagraph with respect to any position if such reporting is not required to carry out the purposes of this section4 7#c7 ,special rules for physically settled positions ,for purposes of this subsection1 if a taxpayer settles a position which is part of a straddle by delivering property to which the position relates 7and such position1 if terminated1 would result in a realization of a loss71 then such taxpayer shall be treated as if such taxpayer-- 7,a7 terminated the position for its fair market value immediately before the settlement1 and 7,b7 sold the property so delivered by the taxpayer at its fair market value4 7b7 ,regulations ,the ,secretary shall prescribe such regulations with respect to gain or loss on positions which are a part of a straddle as may be appropriate to carry out the purposes of this section and section #bfc7;g74 ,to the extent consistent with such purposes1 such regulations shall include rules applying the principles of subsections 7a7 and 7d7 of section #ajia and of subsections 7b7 and 7d7 of section #abcc 7as in effect before their repeal74 7c7 ,definitions and rules relating to straddles ,for purposes of this section-- 7#a7 ,straddle defined ,the term straddle means offsetting positions with respect to applicable property4 7#b7 ,offsetting positions ,a taxpayer holds offsetting positions with respect to applicable property if the taxpayer holds any position which by itself1 or in combination with #a or more other positions held by the taxpayer1 has a delta 7within the meaning of section #dib7;d77#a77 with respect to any other position held by the taxpayer which is within the range beginning with minus #j4g and ending with minus #a4j4 ,for purposes of this paragraph1 positions shall be taken into account whether or not they are in the same applicable property4 7#c7 ,determination of delta ,for purposes of this section-- 7,a7 ,method of determination ,the delta with respect to any position in applicable property with respect to another position in applicable property 7or any combination of such positions7 shall be determined in the same manner as under section #dib7;d77#b74 7,b7 ,timing of delta determination and other special rules ,rules similar to the rules of paragraphs 7#c7 and 7#d7 of section #dib7;d7 shall apply for purposes of this paragraph4 7#d7 ,applicable property and position defined 7,a7 ,applicable property ,the term applicable property means any item which is-- 7i7 described in paragraph 7#a71 7#b71 7#c71 7#e71 7#f71 7#g71 or 7#h7 of section #dic7;a7 7or any item substantially the same as any such item71 and 7ii7 of a type which is actively traded4 7,b7 ,position 7i7 ,in general ,the term position means an interest in applicable property4 7ii7 ,derivatives excluded ,such term shall not include a derivative 7as defined in section #dic74 7,c7 ,stock and debt whose value primarily determined by reference to other items ,except as provided in regulations1 if the taxpayer holds an item described in paragraph 7#a7 or 7#c7 of section #dic7;a7 the value of which1 or with respect to which any payment or other transfer1 is primarily determined by reference to one or more other items described in paragraphs 7#a7 through 7#h7 of section #dic7;a71 then1 solely for purposes of this section1 such item described in paragraph 7#a7 or 7#c7 of section #dic7;a7 shall also be treated as if it were such other item4 7#e7 ,positions held by related persons1 etc 7,a7 ,in general ,in determining whether #b or more positions are offsetting1 the taxpayer shall be treated as holding any position held by a related party 7within the meaning of section #dib7;f774 7,b7 ,certain pass-through entities ,if part or all of the gain or loss with respect to a position held by a partnership1 trust1 or other entity would properly be taken into account for purposes of this chapter by a taxpayer1 then1 except to the extent otherwise provided by the ,secretary1 such position shall be treated as held by the taxpayer4 7#f7 ,special rules for foreign currency 7,a7 ,position to include interest in certain debt ,for purposes of paragraph 7#d77;,b77i71 an obligor's interest in a nonfunctional currency denominated debt obligation is treated as a position in the nonfunctional currency4 7,b7 ,actively traded requirement ,for purposes of paragraph 7#d77;,a77ii71 foreign currency for which there is an active interbank market is presumed to be actively traded4 7d7 ,exception for hedging transactions and investment hedging units ,this section shall not apply in the case of-- 7#a7 any hedging transaction 7as defined in section #abba7;b771 and 7#b7 any investment hedging unit 7as defined in section #dib74 7e7 ,cross reference ,for provisions requiring capitalization of certain interest and carrying charges where there is a straddle1 see section #bfc7;g74 4 7#b7 ,conforming amendments ,the last sentence of section #bdf7;c77#d7 is amended-- 7,a7 by inserting 7as in effect before its repeal7 after section #ajib7;c77#d71 and 7,b7 by inserting 7as so in effect7 after section #ajib7;f74 7c7 ,debt instruments held by insurance companies 7#a7 ,in general ,subsection 7a7 of section #abba is amended by striking or at the end of paragraph 7#g71 by striking the period at the end of paragraph 7#h7 and inserting 2 or1 and by adding at the end the following3 7#i7 any bond1 debenture1 note1 or certificate or other evidence of indebtedness held by an applicable insurance company 7as defined in subsection 7b77#e774 4 7#b7 ,applicable insurance company ,section #abba7;b71 as amended by this ,act1 is amended by adding at the end the following3 7#e7 ,applicable insurance company ,for purposes of subsection 7a77#i7-- 7,a7 ,in general ,the term applicable insurance company means1 with respect to any taxable year1 an insurance company 7as defined in the last sentence of section #haf7;a77-- 7i7 which is subject to tax under section #hja7;a7 or section #hca7;a71 7ii7 with respect to which sections #hca7;b71 #hce1 and #hdb do not apply1 and 7iii7 which is not treated as a stock insurance company solely by reason of section #hcc7;a77#a74 7,b7 ,permanent treatment by company as ordinary asset ,if an asset is treated as an asset described in subsection 7a77#i7 with respect to any applicable insurance company for any taxable year1 such asset shall be treated as so described during any subsequent taxable year such asset is held by such company4 4 7#c7 ,regulations ,paragraph 7#d7 of section #abba7;b7 is amended-- 7,a7 by striking ,the ,secretary and inserting3 7,a7 ,related parties ,the ,secretary 1 and 7,b7 by adding at the end the following3 7,b7 ,assets of insurance companies ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of subsection 7a77#i71 including such regulations as may be necessary to prevent the avoidance of ,federal income tax through the sale or exchange of assets described in such subsection4 4 7#d7 ,effective date 7,a7 ,in general ,the amendments made by this subsection shall apply to any bond1 debenture1 note1 or certificate or other evidence of indebtedness held or acquired after the #ij-;day period beginning with the date of the enactment of this ,act4 7,b7 ,transition rule ,if a taxpayer has a capital loss carryover to any taxable year of the taxpayer beginning after the close of the #ij-;day period described in subparagraph 7,a71 the taxpayer shall1 in addition to other short-term capital gain of the taxpayer 7if any71 treat as short-term capital gain 7rather than as ordinary income7 an amount equal to the lesser of-- 7i7 the net gain 7if any7 from sales or exchanges during such taxable year of assets to which section #abba7;a77#i7 of such ,code 7as added by paragraph 7#a77 applies1 or 7ii7 the capital loss carryovers to such taxable year from taxable years beginning before the close of such period4 7d7 ,r,i,cs allowed net operating loss deduction 7#a7 ,in general ,paragraph 7#b7 of section #heb7;b7 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 through 7,g7 as subparagraphs 7,b7 through 7,f71 respectively4 7#b7 ,other modifications ,paragraph 7#f7 of section #agb7;d7 is amended to read follows3 7#f7 ,modifications related to ,r,i,cs and ,r,e,i,ts ,in the case of any taxable year for which part ,i or ,,ii of subchapter ,m applies to the taxpayer-- 7,a7 the net operating loss for such taxable year shall be computed by taking into account-- 7i7 in the case of a regulated investment company1 the adjustments described in section #heb7;b77#b7 7other than the deduction for dividends paid described in subparagraph 7,c7 thereof771 and 7ii7 in the case of a real estate investment trust1 the adjustments described in section #heg7;b77#b7 7other than the deduction for dividends paid described in subparagraph 7,b7 thereof71 7,b7 where such taxable year is a prior taxable year referred to in paragraph 7#b7 of subsection 7b71 references in such paragraph to taxable income shall be treated as references to-- 7i7 in the case of a regulated investment company1 regulated investment company taxable income 7as defined in section #heb7;b77#b771 and 7ii7 in the case of a real estate investment trust1 real estate investment taxable income 7as defined in section #heg7;b77#b771 and 7,c7 subsection 7a77#b7 shall be applied by treating references to taxable income as references to-- 7i7 in the case of a regulated investment company1 regulated investment company taxable income 7as defined in section #heb7;b77#b77 but without regard to the deduction for dividends paid 7as defined in section #efa71 and 7ii7 in the case of a real estate investment trust1 real estate investment taxable income 7as defined in section #heg7;b77#b77 but without regard to the deduction for dividends paid 7as defined in section #efa74 4 7#c7 ,conforming amendments 7,a7 ,section #ddc7;e77#c7 is amended by striking section #heb7;b77#b77;,d7 and inserting section #heb7;b77#b77;,c74 7,b7 ,section #heb7;a77#a77;,a7 is amended by striking subsection 7b77#b77;,d7 and inserting subsection 7b77#b77;,c74 7,c7 ,section #dihb7;e77#a77;,a7 is amended by striking and 7,d7 and inserting and 7,c74 7#d7 ,effective date ,the amendments made by this subsection shall apply to net operating losses for taxable years ending after the #ijth day after the date of the enactment of this ,act4 7e7 ,nonrecognition of gain or loss from transactions by a corporation with respect to its stock 7#a7 ,in general ,section #ajcb is amended to read as follows3 #ajcb4 ,transactions by a corporation with respect to its stock 7a7 ,nonrecognition on exchange of stock for property ,no gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock of such corporation4 7b7 ,derivative transactions by a corporation with respect to its stock 7#a7 ,in general ,except as otherwise provided in this subsection1 section #ajcb derivative items of a corporation shall not be taken into account in determining such corporation's liability for tax under this subtitle4 7#b7 ,income recognition on certain forward contracts 7,a7 ,in general ,if-- 7i7 a corporation acquires its stock1 and 7ii7 such acquisition is part of a plan 7or series of related transactions7 pursuant to which the corporation enters into a forward contract with respect to its stock1 such corporation shall include amounts in income as if the excess of the amount to be received under the forward contract over the fair market value of the stock as of the date the corporation entered into the forward contract were original issue discount on a debt instrument acquired on such date4 ,the preceding sentence shall apply only to the extent that the amount of stock involved in the forward contract does not exceed the amount acquired as described in clause 7i74 7,b7 ,plan presumed to exist ,if a corporation enters into a forward contract with respect to its stock within the #fj-;day period beginning on the date which is #cj days before the date that the corporation acquires its stock1 such acquisition shall be treated as pursuant to a plan described in subparagraph 7,a77ii7 unless it is established that entering into such contract and such acquisition are not pursuant to a plan or series of related transactions4 7c7 ,section #ajcb derivative items ,for purposes of this section1 the term section #ajcb derivative item means1 with respect to any corporation1 any item of income1 gain1 loss1 or deduction if-- 7#a7 such item arises out of the rights or obligations under any derivative 7as defined in section #dic7 to the extent such derivative relates to the corporation's stock 7or is attributable to any transfer or extinguishment of any such right or obligation71 or 7#b7 such item arises under any other contract or position but only to the extent that such item reflects 7or is determined by reference to7 changes in the value of such stock or distributions thereon4 ,such term shall not include any deduction with respect to which section #hc7;h7 applies and shall not include any deduction for any item which is in the nature of compensation for services rendered4 ,for purposes of this subparagraph1 de minimis relationships1 as determined by the ,secretary1 shall be disregarded4 7d7 ,coordination with derivative and straddle rules ,in the case of a derivative or other contract or position described in subsection 7c7 which is held by a corporation with respect to its stock-- 7#a7 this section 7rather than part ,,iv of subchapter ,e or section #ajib7 shall apply in determining the treatment of section #ajcb derivative items under this subtitle1 and 7#b7 such derivative or other contract or position shall not be taken into account in determining whether the corporation has an investment hedging unit1 applicable property interest1 or straddle with respect to its stock for purposes of such part or section4 7e7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this section1 including regulations or other guidance which treat the portion of an instrument which is described in subsection 7c77#a7 separately from the portion of such instrument which is not so described4 7f7 ,basis ,for basis of property acquired by a corporation in certain exchanges for its stock1 see section #cfb4 4 7#b7 ,clerical amendment ,the item relating to section #ajcb in the table of sections for part ,,iii of subchapter ,o of chapter #a is amended to read as follows3 ,sec4 #ajcb4 ,transactions by a corporation with respect to its stock4 4 7#c7 ,effective date ,the amendments made by this subsection shall apply to transactions entered into after the date of the enactment of this ,act4 #d4 ,technical and conforming amendments 7a7 ,repeal of certain other superceded rules for determining capital gains and losses 7#a7 ,in general ,part ,,iv of subchapter ,p of chapter #a is amended by striking sections #abcc1 #abcd1 #abcd;,a1 #abcd;,b1 #abcf1 #abef1 #abeh1 #abei1 and #abfj 7and by striking the items relating to such sections in the table of sections for such part74 7#b7 ,conforming amendments related to repeal of section #abcd ,section #fjde7;h77#b7 is amended-- 7,a7 by striking 7as defined in section #abcd7;b77#b77;,a771 and 7,b7 by adding at the end the following3 ,for purposes of the preceding sentence1 the term closing transaction means any termination of the taxpayer's obligation under an option in property other than through the exercise or lapse of the option44 7#c7 ,conforming amendments related to repeal of section #abcf 7,a7 ,section #dge7;d77#c77;,a7 is amended by striking or section #abcf7;b74 7,b7 ,section #eab7;b77#e7 is amended by striking section #abcf7;c7 and inserting section #ajeh7;c74 7,c7 ,section #ajeh is amended-- 7i7 by striking 7as defined in section #abcf7;c77 in subsection 7a71 and 7ii7 by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,securities ,for purposes of this section1 the term security means any share of stock in any corporation1 certificate of stock or interest in any corporation1 note1 bond1 debenture1 or evidence of indebtedness1 or any evidence of an interest in or right to subscribe to or purchase any of the foregoing4 4 7#d7 ,conforming amendments related to repeal of section #abef 7,a7 ,section #dfa7;i77#c77;,b7 is amended to read as follows3 7,b7 any partnership or other entity 7other than a corporation which is not an ,s corporation7 if more than #ce percent of the losses of such entity during the taxable year are allocable to limited partners or limited entrepreneurs 7within the meaning of subsection 7k77#d771 and 4 7,b7 ,section #dge7;d77#a7 is amended by striking sections #bfc7;g71 #bfc;,a1 and #abef7;a7 and inserting sections #bfc7;g7 and #bfc;,a4 7,c7 ,section #ihh7;c77#a7 is amended by striking subparagraphs 7,d7 and 7,e74 7,d7 ,section #abab is amended by striking subsection 7c74 7,e7 ,section #abbc is amended by striking paragraphs 7#g7 and 7#ad74 7,f7 ,section #abha7;b77#a77;,e7 is amended to read as follows3 7,e7 is part of a hedging transaction 7as defined in section #abba7;b77 or an investment hedging unit 7as defined in section #dib71 or 4 7,g7 ,section #adjb is amended by striking subsection 7i74 7,h7 ,section #dihb7;e77#f77;,b7 is amended by striking sections #abef and #abif and inserting sections #dia and #abif4 7#e7 ,conforming amendments related to repeal of section #abei ,section #dge7;f77#a7 is amended by striking subparagraph 7,c7 and by redesignating subparagraph 7,d7 as subparagraph 7,c74 7b7 ,other conforming amendments 7#a7 ,section #cee7;g77#b77;,b77i77,v7 is amended to read as follows3 7,v7 any derivative 7as defined in section #dic71 4 7#b7 ,section #hef7n77#d7 is amended by inserting or derivatives 7as defined in section #dic7 after securities 7as defined in section #dge7;c77#b774 7#c7 ,section #heg7;e77#b77;,c77i7 is amended by striking section #hfj;,e or #abgb and inserting section #dia1 #hfj;,e1 or #abgb4 7#d7 ,section #ihh7;d77#a7 is amended-- 7,a7 by striking or #abef and inserting or #dia1 and 7,b7 by striking #ajib1 and #abef and inserting #dia1 and #ajib4 7#e7 ,section #ajia7;e7 is amended to read as follows3 7e7 ,coordination with mark to market of derivatives and underlying investments ,for purposes of this section1 the term stock or securities shall not include-- 7#a7 any derivative 7as defined in section #dic71 or 7#b7 any underlying investment 7as defined in section #dib7;e77#a77 which1 at the time of the sale or other disposition1 is part of an investment hedging unit 7as defined in section #dib74 4 7#f7 7,a7 ,section #abba7;a77#f7 is amended to read as follows3 7#f7 any-- 7,a7 derivative 7as defined in section #dic71 or 7,b7 any underlying investment 7as defined in section #dib7;e77#a77 which is part of an investment hedging unit 7as defined in section #dib71 4 7,b7 ,section #abba7;b7 is amended by striking paragraph 7#a74 7#g7 ,section #dige7;f77#aa77;,d7 is amended by striking clauses 7i7 and 7ii7 and inserting the following3 7i7 ,security ,the term security means any security described in section #dge7;c77#b7 7without regard to subparagraph 7,d77iii7 thereof7 and any derivative with respect to such a security 7within the meaning of section #dic74 7ii7 ,commodity ,the term commodity means any commodity described in section #dge7;e77#b7 7without regard to subparagraph 7,b77iii7 thereof7 and any derivative with respect to such a commodity 7within the meaning of section #dic74 4 7#h7 ,the table of parts for subchapter ,e of chapter #a is amended by adding at the end the following new item3 ,part ,,iv4 ,tax treatment of derivatives and similar contracts 4 #e4 ,effective dates 7a7 ,in general ,except as provided in this ,act-- 7#a7 the amendments made by section #b shall apply to taxable events occurring after the #ij-;day period beginning with the date of the enactment of this ,act1 in taxable years ending after the last day of such period1 and 7#b7 the amendments made by sections #c and #d shall apply to derivatives and underlying investments held after the last day of such period4 7b7 ,identification requirements ,if1 as of the close of the #ij-;day period described in subsection 7a77#a71 a taxpayer simultaneously holds #a or more derivatives with respect to an underlying investment and the underlying investment-- 7#a7 the taxpayer shall make the identifications required under section #dib7;c77#b7 of ,internal ,revenue ,code of #aihf 7as added by section #b of this ,act7 before the close of such period1 and 7#b7 if such identifications result in an investment hedging unit1 the first applicable hedging period with respect to such unit shall begin on the day after the close of such period4 7c7 ,definitions ,for purposes of this section1 any term used in this section which is also used in part ,,iv of subchapter ,e of chapter #a of such ,code 7as so added7 shall have the same meaning as when used in such part4