Tax Controversy & Transfer Pricing
Tax Treatment of Derivatives, Securities, and Trading Strategies

The tax treatment of derivatives, securities, and trading strategies is constantly evolving and often the subject of tax disputes. Brattle has been retained to apply economic principles to analyze the tax treatment and economic substance of various derivative and securities positions.

Representative Engagements:

  • Assisted monoline insurer in its tax dispute with the IRS regarding tax refund during the recent financial crisis. The dispute involved the appropriate taxation of credit derivatives, currently an unsettled area in tax policies and regulation.
  • Analyzed multiple trading portfolios in a Financial Crisis bankruptcy.
  • In a dispute over the proper implementation of § 1.446-4, advised a client on the application of economic principles that would provide an economic matching of income, deductions, gains, and losses between the complex derivatives used as hedges and the hedged items.
  • Advised a client on whether a portfolio of credit default swaps belatedly identified as hedging transactions under § 1.1221 would have been an economically rational hedge for the taxpayer’s credit market exposures.