Wednesday, 29 March 2017
Last updated 3 hours ago
Jun 14 2012 | 4:29pm ETOriginal publication date: Jun 11, 2012
In order to compute accurate portfolio tax liabilities, tax professionals and compliance officers must comply with the following sections of the U.S. tax code: wash sales, straddles, constructive sales, qualified dividends, and short sales. However, vague and poorly defined tax code verbiage makes abiding by these sections very taxing. This paper offers guidelines based on ideas from the Economic Substance Doctrine and market risk management to facilitate compliance with these sections. In addition, we offer a more concrete, alternative definition of the term “substantially identical.” Lastly, the paper proposes that “substantially identical” and “offsetting positions” share enough in common and should be combined into a single term. We suggest this consolidation in order to make it easier for taxpayers to understand and more readily comply with the tax code.