Short-term currency gains need not disqualify a RIC
Article Abstract:
Corporations that are counted as regulated investment companies (RICs) under IRC Section 851(b) need explicit guidance from the IRS in how to apply the definition of 'qualifying income.' Though it is clear that Congress intended to expand this definition, the exact application is unclear. Short-term gains from investment in foreign currency might seem to disqualify a RIC since they do not appear to be related to the principal business of stock and securities investment. However, Section 851(b)(3) may be interpreted with the help of the Investment Company Act of 1940 in such a way to allow RICs to have such gains.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1993
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Using a "call" option straddle to maximize cash dividend yield
Article Abstract:
Call option straddles can be used to maximize the cash dividend yield of regulated investment company shares by the operation of IRC section 1092 on straddle positions. Offsetting positions, such as embedded short call options and section 1256 contracts, will be subject to recharacterization under section 1092 if the the positions substantially reduce the risk of prepayment. Section 1092 operates to recharacterize early retirement loss as capital loss, but income from early retirement of the pass-through certificates is ordinary gain.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1995
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Mutual funds: ordinary-capital mixed straddle treatment should avoid character conversion
Article Abstract:
Accounting methods of regulated investment companies should prevent the convertibility of capital gains and losses between short and long terms. IRC section 1092(b) must be satisfied for mixed straddles of capital and ordinary finances using contracts covered in IRC section 1256. There is no regulatory guidance on what method to use, so the principle of reducing convertibility is the safest guide to mixed straddles for mutual funds.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1992
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