The Sixth Circuit Was Right in Wright

Wolters Kluwer Journal of Taxation of Financial Products
April 2016
In this article, Linda Carlisle examines the Sixth Circuit's opinion finding that the term "foreign currency contract" as used in Code Sec. 1256 applies to over-the-counter currency forward contracts but not over-the-counter options on currency. Recently, the Fifth Circuit reversed a Tax Court decision where it looked to the legislative history of the Internal Revenue Code to discern congressional intent with respect to the statute's language. "In contrast, the Sixth Circuit looked solely to the statutory language and saw no need 'to resort to legislative history to interpret section 1256,'" said Carlisle regarding the Wright decision. She explores how the Sixth Circuit reached its verdict and why it correctly ignored the legislative history. In examining the Wright decision taxpayers "now have substantial authority for taking the position that major foreign currency options are Code Sec. 1256 contracts and that they are not," Carlisle said. "The [Internal Revenue Service] should acquiesce to Wright and end the uncertainty."
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