Current Federal Tax Developments

Journal of Taxation of Financial Products
July 2015
In this article, Linda E. Carlisle discusses the Fifth Circuit's reversal of the Tax Court's decision in Pilgrim's Pride Corp., holding that Code Sec. 1234A(1) did not apply to classify the loss realized by the company on the abandonment of securities as a capital loss. The IRS had previously taken inconsistent positions with respect to the section's application and the Tax Court agreed with the IRS. "The Fifth Circuit, however, properly looked to the legislative history to determine that Code Sec. 1234A(1) only applies to derivative or contractual rights attributable to a capital asset," Carlisle said.

"This was clearly a case in which the court needed to look at more than the words of the Code. Even though both the Tax Court and the Fifth Circuit based their decisions on the plain language of the statute, the cases reached opposite conclusions," she said. "Hopefully, the IRS will acquiesce in this decision and not reopen the debate regarding the scope of Code Sec. 1234A."
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