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Abstract: 

This article discusses the “mark-to-market” proposal contained in Dave Camp’s discussion draft of the Tax Reform Act of 2014, which would require all investors to treat derivatives and other investments that are hedged with derivatives as sold for fair market value at the end of each year and to pay tax on any resulting paper gains at ordinary income rates. Camp’s proposal would make the tax consequences of owning derivatives more onerous than the tax consequences of owning non-derivatives. The proposal would add administrative complexity to the taxation of financial products, could make many common investments and business transactions prohibitively expensive for ordinary investors and businesses, and could increase market volatility.

Keywords: mark-to-market; Camp proposal; tax reform; derivatives

Affiliations:  1: Cadwalader, Wickersham & Taft LLP; 2: Cadwalader, Wickersham & Taft LLP; 3: Cadwalader, Wickersham & Taft LLP.