The House Ways and Means Committee has proposed a series of tax reforms on various financial products ranging from financial derivatives to simplifying business hedging tax rules.
Transactions that are appropriately treated as hedges for accounting purposes will also be treated as hedges for tax purposes.
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The draft also plans to bring into greater harmony the tax treatment of bonds traded both at a discount and at a premium.
For those trading in the secondary market at a discount, the holder would be required to recognize taxable income over the remaining life of the bond.
The amount of the discount would be limited by the increase in interest rates since the issue date of the bond.
For bonds purchased at a premium, taxpayers would be allowed to claim above-the-line deductions.
Tax loss harvesting on securities may be eliminated. The so-called wash sale rule would be reformed so that it applies to closely related parties.
- Valuing derivatives that would be subject to mark-to-market tax treatment
- Identifying tax provisions that need modification or that are obsolete
- Reporting rules for information required to implement the new rules
- Other financial product taxation that have so far not been included in the draft