Today, Treasury and the IRS issued final regulations (TD 9678) applicable to section 1092 identified mixed straddles established after August 18, 2014.  These regulations describe how to account for unrealized gain or loss on a position held by a taxpayer prior to the time the taxpayer establishes a mixed straddle using straddle-by-straddle identification.

  • In August 2013, Treasury and the IRS published temporary regulations on straddle-by-straddle identification (TD 9627).  The text of the temporary regulations also served as the text of the corresponding proposed regulations (REG-112815-12).
    • The 2013 temporary regulations added Treas. Reg. § 1.1092(b)-6T, which applied to identified mixed straddles established after August 1, 2013, requiring that unrealized gain or loss on a position held prior to the establishment of an identified mixed straddle be taken into account at the time and have the character provided by provisions of the Code that would apply if the identified mixed straddle had not been established.
    • The 2013 temporary regulations changed the timing of the recognition of the unrealized gain or loss provided for in Treas. Reg. § 1.1092(b)-3T(b)(6) of the 1985 temporary regulations.  Treas. Reg. § 1.1092(b)-3T(b)(6) of the 1985 temporary regulations required that unrealized gain or loss on a position that becomes a position in a section 1092(b)(2) identified mixed straddle be recognized on the day prior to establishing the section 1092(b)(2) identified mixed straddle.
  • Effective July 18, 2014, the final regulations adopt the provisions of the 2013 proposed regulations with certain clarifications and remove the corresponding 2013 temporary regulations. 

The regulations can be accessed via: TD 9678.pdf