The Schizophrenic World of Code Sec. 1234A

Journal of Taxation of Financial Products

In this article, Linda Carlisle analyzes the Tax Court's decision in Pilgrim's Pride and offers observations on how the Fifth Circuit should rule. "Although the Tax Court states that the 'plain meaning' of Code Sec. 1234A is clear, both taxpayers and the IRS have read it to mean different things at different times. The question that the Fifth Circuit will have to resolve in the appeal of Pilgrim's Pride is whether a 'right' with respect to property is limited to a derivative right or includes property rights," Carlisle said. "As the IRS did with the definition of foreign currency contracts, in our view, the Fifth Circuit should look to the intent of Congress when Code Sec. 1234A was enacted, conclude that Code Sec. 1234A applies only to derivative rights with respect to personal property, and remand the case for further consideration under Code Sec. 165(g)."

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The Schizophrenic World of Code Sec. 1234A