PUBLIC LAW 103-66 —AUG. 10, 1993 107 STAT. 483 "(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 liedge* 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— " (A) identifies any security under subsection (b)(2) as being described in subsection (b)(1) and such security is not so described, or "(B) fails under subsection (c)(2)(F)(iii) to identify any position which is described in subsection (c)(2)(F) (without regard to clause (iii) thereof) at the time such identification is required, the provisions of subsection (a) shall apply to such security or position, except that any loss under this section prior to the disposition of the security or position shall be recognized only to the extent of gain previously recognized under this section (and not previously taken into account under this paragraph) with respect to such security or position.
- (3) CHARACTER OF GAIN OR LOSS. —
"(A) IN GENERAL. —Except as provided in subparagraph (B) or section 1236(b)—
- (i) IN GENERAL.—Any gain or loss with respect
to a seciuity under subsection (a)(2) shall be treated as ordinary income or loss. "(ii) SPECIAL RULE FOR DISPOSITIONS. —If— "(I) gain or loss is recognized with respect to a security before the close of the taxable year, and "(II) subsection (a)(2) would have applied if the security were held as of the close of the taxable year, such gain or loss shall be treated as ordinary income or loss.
- (B) EXCEPTION.— Subparagraph (A) shall not apply
to any gain or loss which is allocable to a period during which— "(i) the security is described in subsection (b)(l)(C) (without regard to subsection (b)(2)),
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