PUBLIC LAW 100-647—NOV. 10, 1988
102 STAT. 3717
SEC. 6130. TREATMENT OF CERTAIN INSTRUMENTS UNDER FOREIGN CURRENCY RULES.
(a) GENERAL RULE.—Clause (iii) of section 988(c)(l)(B) of the Code (as amended by title I) is amended by striking out "unless instrument would be marked to market under section 1256 if on the last day of the taxable year". (b) SPECIAL RULES.—Paragraph (1) of section 988(c) of the Code is amended by adding at the end thereof the following subparagraphs:
1986 such held 1986 new
"(D) EXCEPTION FOR CERTAIN INSTRUMENTS MARKED TO MARKET.—
"(i) IN GENERAL.—Clause (iii) of subparagraph (B) shall not apply to any regulated futures contract or nonequity option which would be marked to market under section 1256 if held on the last day of the taxable year, "(ii) ELECTION OUT.—
"(I) IN GENERAL.—The taxpayer may elect to have clause (i) not apply to such taxpayer. Such an election shall apply to contracts held at any time during the taxable year for which such election is made or any succeeding taxable year unless such election is revoked with the consent of the Secretary. "(II) TIME FOR MAKING ELECTION.—Except as provided in regulations, an election under subclause (I) for any taxable year shall be made on or before the 1st day of such taxable year (or, if later, on or before the 1st day during such year on which the taxpayer holds a contract described in clause (i)). "(Ill) SPECIAL RULE FOR PARTNERSHIPS, ETC.—In the case of a partnership, an election under subclause (I) shall be made by each partner separately. A similar rule shall apply in the case of an S corporation. "(iii) TREATMENT OF CERTAIN PARTNERSHIPS.—This
subparagraph shall not apply to any income or loss of a partnership for any taxable year if such partnership made an election under subparagraph (E)(iii)(V) for such year or any preceding year. "(E) SPECIAL RULES FOR CERTAIN FUNDS.—
"(i) IN GENERAL.—In the case of a qualified fund, clause (iii) of subparagraph (B) shall not apply to any instnmient which would be marked to market under section 1256 if held on the last day of the taxable year (determined after the application of clause (iv)). "(ii) SPECIAL RULE WHERE ELECTING PARTNERSHIP DOES
NOT QUALIFY.—If any partnership made an election under clause (iii)(V) for any taxable year and such partnership has a net loss for such year or any succeeding year from instruments referred to in clause (i), the rules of clauses (i) and (iv) shall apply to any such loss year whether or not such partnership is a qualified fund for such year.
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