Page:United States Statutes at Large Volume 107 Part 1.djvu/489

 PUBLIC LAW 103-66—AUG. 10, 1993 107 STAT. 463 (1) IN GENERAL. —Part IV of subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) IS amended by adding at the end the following new section: "SEC. 1258. RECHARACTERIZATION OF GAIN FROM CERTAIN FINAN- CIAL TRANSACTIONS. "(a) GENERAL RULE.— In the case of any gain— ''(1) which (but for this section) would be treated as gain from the sale or exchange of a capital asset, and ''(2) which is recognized on the disposition or other termination of any position which was held as part of a conversion transaction, such gain (to the extent such g£dn does not exceed the applicable imputed income amount) shall be treated as ordinary income. "(b) APPLICABLE IMPUTED INCOME AMOUNT. —For purposes of subsection (a), the term 'applicable imputed income amount means, with respect to any disposition or other termination referred to in subsection (a), an amount equal to— "(1) the amount of interest which would have accrued on the taxpayer's net investment in the conversion transaction for the period ending on the date of such disposition or otiier termination (or, if earlier, the date on which the requirements of subsection (c) ceased to be satisfied) at a rate equal to 120 percent of the applicable rate, reduced by (2) the amount treated as ordinary income under subsection (a) with respect to any prior disposition or other termination of a position which was held as a part of such transaction. The Secretary shall by regulations provide for such reductions in Regulations. the applicable imputed income amount as may be appropriate by reason of amounts capitalized under section 263(g), ordinary income received, or otherwise. " (c) CONVERSION TRANSACTION. — For purposes of this section, the term 'conversion transaction' means any transaction— "(1) substantially all of the taxpayer's expected return from which is attributable to the time value of the taxpayer's net investment in such transaction, and "(2) which is— "(A) the holding of any property (whether or not actively traded), and the entering into a contract to sell such property (or substantially identical property) at a price determined in accordance with such contract, but only if such property was acquired and such contract was entered into on a substantially contemporaneous basis, "(B) an applicable straddle, "(C) any other transaction which is marketed or sold as producing capital gains from a transaction described in paragraph (1), or "(Dj any other transaction specified in regulations prescribed by the Secretary. "(d) DEFINITIONS AND SPECIAL RULES.— For purposes of this section— "(1) APPLICABLE STRADDLE.— The term 'applicable straddle' means any straddle (within the meaning of section 1092(c)); except that the term 'personal property* shall include stock. ^(2) APPLICABLE RATE.— The term 'applicable rate' means—

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