[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1236-1]

[Page 320-321]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1236-1  Dealers in securities.

    (a) Capital gains. Section 1236(a) provides that gain realized by a 
dealer in securities from the sale or exchange of a security (as defined 
in paragraph (c) of this section) shall not be considered as gain from 
the sale or exchange of a capital asset unless:
    (1) The security is, before the expiration of the thirtieth day 
after the date of its acquisition, clearly identified in the dealer's 
records as a security held for investment or, if acquired before October 
20, 1951, was so identified before November 20, 1951; and
    (2) The security is not held by the dealer primarily for sale to 
customers in the ordinary course of his trade or business at any time 
after the identification referred to in subparagraph (1) of this 
paragraph has been made.

Unless both of these requirements are met, the gain is considered as 
gain from the sale of assets held by the dealer primarily for sale to 
customers in the course of his business.
    (b) Ordinary losses. Section 1236(b) provides that a loss sustained 
by a dealer in securities from the sale or exchange of a security shall 
not be considered a loss from the sale or exchange of property which is 
not a capital asset if at any time after November 19, 1951, the security 
has been clearly identified in the dealer's records as a security held 
for investment. Once a security has been identified after November 19, 
1951, as being held by the dealer for investment, it shall retain that 
character for purposes of determining loss on its ultimate disposition, 
even though at the time of its disposition the dealer holds it primarily 
for sale to his customers in the ordinary course of his business. 
However, section 1236 has no application to the extent that section 
582(c) applies to losses of banks.
    (c) Definitions--(1) Security. For the purposes of this section, the 
term security means any share of stock in any corporation, any 
certificate of stock or interest in any corporation, any note, bond, 
debenture, or other evidence of

[[Page 321]]

indebtedness, or any evidence of any interest in, or right to subscribe 
to or purchase, any of the foregoing.
    (2) Dealer in securities. For definition of a dealer in securities, 
see the regulations under section 471.
    (d) Identification of security in dealer's records. (1) A security 
is clearly identified in the dealer's records as a security held for 
investment when there is an accounting separation of the security from 
other securities, as by making appropriate entries in the dealer's books 
of account to distinguish the security from inventories and to designate 
it as an investment and by (i) indicating with such entries, to the 
extent feasible, the individual serial number of, or other 
characteristic symbol imprinted upon, the individual security, or (ii) 
adopting any other method of identification satisfactory to the 
Commissioner.
    (2) In computing the 30-day period prescribed by section 1236(a), 
the first day of the period is the day following the date of 
acquisition. Thus, in the case of a security acquired on March 18, 1957, 
the 30-day period expires at midnight on April 17, 1957.

[T.D. 6500, 25 FR 12015, Nov. 26, 1960, as amended by T.D. 6726, 29 FR 
5667, Apr. 29, 1964]