[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.475(b)-2]

[Page 558]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.475(b)-2  Exemptions--identification requirements.

    (a) Identification of the basis for exemption. An identification of 
a security as exempt from mark to market does not satisfy section 
475(b)(2) if it fails to state whether the security is described in--
    (1) Either of the first two subparagraphs of section 475(b)(1) 
(identifying a security as held for investment or not held for sale); or
    (2) The third subparagraph thereof (identifying a security as a 
hedge).
    (b) Time for identifying a security with a substituted basis. For 
purposes of determining the timeliness of an identification under 
section 475(b)(2), the date that a dealer acquires a security is not 
affected by whether the dealer's basis in the security is determined, in 
whole or in part, either by reference to the basis of the security in 
the hands of the person from whom the security was acquired or by 
reference to other property held at any time by the dealer. See Sec. 
1.475(a)-3 for rules governing how the dealer accounts for such a 
security if this identification is not made.
    (c) Integrated transactions under Sec. 1.1275-6--(1) Definitions. 
The following terms are used in this paragraph (c) with the meanings 
that are given to them by Sec. 1.1275-6: integrated transaction, 
legging into, legging out, qualifying debt instrument, Sec. 1.1275-6 
hedge, and synthetic debt instrument.
    (2) Synthetic debt held by a taxpayer as a result of legging in. If 
a taxpayer is treated as the holder of a synthetic debt instrument as 
the result of legging into an integrated transaction, then, for purposes 
of the timeliness of an identification under section 475(b)(2), the 
synthetic debt instrument is treated as having the same acquisition date 
as the qualifying debt instrument. A pre-leg-in identification of the 
qualifying debt instrument under section 475(b)(2) applies to the 
integrated transaction as well.
    (3) Securities held after legging out. If a taxpayer legs out of an 
integrated transaction, then, for purposes of the timeliness of an 
identification under section 475(b)(2), the qualifying debt instrument, 
or the Sec. 1.1275-6 hedge, that remains in the taxpayer's hands is 
generally treated as having been acquired, originated, or entered into, 
as the case may be, immediately after the leg-out. If any loss or 
deduction determined under Sec. 1.1275-6(d)(2)(ii)(B) is disallowed by 
Sec. 1.1275-6(d)(2)(ii)(D) (which disallows deductions when a taxpayer 
legs out of an integrated transaction within 30 days of legging in), 
then, for purposes of this section and section 475(b)(2), the qualifying 
debt instrument that remains in the taxpayer's hands is treated as 
having been acquired on the same date that the synthetic debt instrument 
was treated as having been acquired.

[T.D. 8700, 61 FR 67722, Dec. 24, 1996]