Federal Tax

U.S. Taxation of Notional Principal Contracts (Portfolio 189)

  • Bloomberg Tax Portfolio, U.S. Taxation of Notional Principal Contracts, No. 189, reviews the U.S. federal income taxation of notional principal contracts. The portfolio is divided into six main parts.

Description

Bloomberg Tax Portfolio, U.S. Taxation of Notional Principal Contracts, No. 189, reviews the U.S. federal income taxation of notional principal contracts. The portfolio is divided into six main parts.

Part I provides a general review of the history of notional principal contracts, the different types of contracts, and the U.S. federal tax treatment of these financial derivatives and other products. Part II addresses the timing of income, deductions, gains, and losses from notional principal contracts. Part III addresses the character of income, deductions, gains, and losses from notional principal contracts. Part IV addresses the source of income, deductions, gains, and losses from notional principal contracts. Part V addresses the U.S. federal income tax treatment of income, deductions, gains, and losses from notional principal contracts denominated in a nonfunctional currency.

Part VI addresses certain miscellaneous U.S. federal income tax issues associated with notional principal contracts, including the interaction of its tax treatment with other financial-related provisions (including, mark-to-market rules, straddles, hedges, short sale, constructive sale and ownership issues, and capitalization issues), with other domestic-related provisions (including, consolidated return, partnership, personal holding company, tax-exempt provisions, foundation excise tax, publicly traded partnerships), with other inbound international tax provisions (U.S. source FDAP and withholding tax, treaty characterization, “effectively connected” character, and foreign government income), with other outbound international tax provisions (Subpart F, Section 956, Passive Foreign Investment Company, and foreign tax credit provisions), and certain reporting obligations.

This Portfolio may be cited as Ocasal & Harter, 189 T.M., U.S. Taxation of Notional Principal Contracts.

Table of Contents

I. Arrangements
II. Timing of Income/Deductions from §446 NPCs
III. Character of Payments
IV. Source of Income from §863 NPCs
V. Timing of Income/Deductions from §988 NPCs
VI. Miscellaneous Issues with Respect to NPCs

Christopher-Ocasal
Christopher Ocasal
Partner
Ernst & Young LLP
Chip Harter
Chip Harter
Principal
PricewaterhouseCoopers LLP
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