Internal Revenue Bulletin:  2010-3 

January 19, 2010 

Rev. Rul. 2010-3


Section 1256 contracts market to market. This ruling holds that the London International Financial Futures and Options Exchange (LIFFE), which is a United Kingdom derivatives market, is a qualified board or exchange within the meaning of section 1256(g)(7)(C) of the Code.

ISSUE

Is London International Financial Futures and Options Exchange (“LIFFE”), which is a regulated exchange of the United Kingdom, a qualified board or exchange within the meaning of section 1256(g)(7)(C) of the Internal Revenue Code?

LAW AND ANALYSIS

Section 1256(g)(7) provides that the term “qualified board or exchange” means:

(A) a national securities exchange which is registered with the Securities and Exchange Commission,

(B) a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, or

(C) any other exchange, board of trade, or other market which the Secretary determines has rules adequate to carry out the purposes of section 1256.

HOLDING

The Internal Revenue Service determines that LIFFE, which is a regulated exchange of the United Kingdom, is a qualified board or exchange within the meaning of section 1256(g)(7)(C).

EFFECTIVE DATE

Under the authority of section 7805(b)(8) of the Code, this revenue ruling is effective for LIFFE Contracts (futures contracts and futures contract options) entered into on or after January 1, 2010.

CHANGE IN METHOD OF ACCOUNTING

A change in the treatment of LIFFE Contracts to comply with this revenue ruling is a change in method of accounting within the meaning of sections 446 and 481 and the regulations thereunder. The Commissioner grants consent to taxpayers to change to the section 1256 mark to market method for the first taxable year during which the taxpayer holds a LIFFE Contract that was entered into on or after January 1, 2010. Such a taxpayer need not file a Form 3115, Application for Change in Accounting Method, and LIFFE Contracts that were entered into before January 1, 2010 will not be covered by the change in method for which consent is granted. Because the change is being made on a “cut-off” basis, there is no potential omission or duplication of income or deductions, and therefore no adjustment under section 481 is required.

DRAFTING INFORMATION

The principal author of this revenue ruling is Andrea Hoffenson of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue ruling, contact Andrea Hoffenson at (202) 622-3930 (not a toll-free call).


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