Federal Tax

The Mark-To-Market Rules of Section 475 (Portfolio 543)

  • This Portfolio analyzes the income tax consequences of the mark-to-market rules of §475 for securities and commodities held by dealers and traders.


Bloomberg Tax Portfolio, The Mark-to-Market Rules of Section 475, No. 543, analyzes the income tax consequences of the mark-to-market rules of §475 for securities held by dealers in securities and electing traders, and for commodities held by electing dealers and traders. After discussing the legislative history and purpose of the mark-to-market rules of §475, and summarizing the basic rules, the Portfolio describes the operation of these rules in detail.

The Portfolio discusses the key concepts of “dealer,” “trader,” “securities,” and “commodities,” and explains the application of the mark-to-market rules in terms of these concepts. In addition, the Portfolio analyzes operation of the rules in the context of original issue and market discount, and interest, on securities that are debt instruments; “customer paper”; life insurance companies; changes in methods of accounting; consolidated returns; global dealing; foreign securities dealers; state taxes; character of gain or loss; elections; and identification and misidentification.

The Worksheets include sample intragroup customer elections and separate-entity hedging elections.
This Portfolio may be cited as Connors, 543 T.M., The Mark-to-Market Rules of Section 475.

Table of Contents

I. Introduction
II. Legislative History and Purpose of Mark-to-Market Rules
III. Other Mark-to-Market Initiatives
IV. Basic Rules – Recognition Before Realization
V. Dealer In Securities
VI. Change in Method of Accounting
VII. Securities Subject to § 475 Treatment
VIII. Exemptions from Mark-to-Market
IX. Character of Gain/Loss
X. Identification and Misidentification
XI. Consolidated Return Issues
XII. Dealers and Traders in Commodities
XIII. Valuation
XIV. The Global Dealing Regulations
XV. Rules Affecting Foreign Securities Dealers
XVI. State Tax Issues

Peter Connors
Orrick Herrington & Sutcliffe LLP
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