IRS Issues Final Mixed Straddle Rules, Adopting Much Of Proposed Regulations

The IRS on July 18 issued final regulations (T.D. 9678) under Treas. Reg. Sec. 1.1092(b)-6, which provide how a taxpayer who establishes a "mixed straddle" accounts for unrealized gain or loss on a position.

A mixed straddle is defined as a straddle (which itself is defined in Section 1092(c)(1)) where all of the positions are held as capital assets, at least one (but not all) of the positions is a Section 1256 contract, a Section 1256(d) election has not been made, and the straddle isn't part of a larger straddle.

Special rules for the treatment of an "identified mixed straddle," as defined in Treas. Reg. Sec. 1.1092(b)-3T(a), are provided in Treas. Reg. Secs. 1.1092(b)-3T(b)(2) through (7).