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End-Run Around Constructive Ownership Rules Fails—But Could Tweaks to Transaction Change Tax Result for Investor?  

Author:  Robert N.  Gordon.; Mark  Fichtenbaum.

Source: Volume 28, Number 02, Winter 2011 , pp.83-86(4)

Journal of Taxation of Investments

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In Advice Memorandum 2010-005, the IRS has taken a firm substance-over-form position to derail an “option transaction” designed to create deferred long-term capital gains. Once characterization of the investment as an option or some type of derivative was rejected, the investor—a hedge fund—faced taxation as the owner of securities.

Keywords:  AM 2010-1005, looking through a derivative, option on a managed account, derivative disregarded, true owner of securities

Affiliations:  1: Twenty-First Securities Corp; 2: Twenty-First Securities Corp.

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