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<<The constructive sale rules for appreciated financial positions get so complicated so quickly, I'll just ask my question and take my chances on looking naive.>>

Yes they do. Have you read my articles on the constructive sale rules in the Taxes FAQ area. I discuss collars in those articles. Something that you might be interested in.

<<If a taxpayer holds an appreciated financial position, and does something - let's say a really tight collar - that would trigger the constructive sale rules, there's an "out" from those rules if "such transaction" is closed during January and "the appreciated financial position" is held for 60 days beyond the closing transaction.>>


<<Here's my question: If the collar is on *half* of the TP's appreciated financial position, how does he identify that half, so that he can show he held "the" financial position for the sixty days?>>

If it were me, I think that I'd want to hold on to the ENTIRE position for the 60 day period in order to avoid any possible confusion. There are no regulations or other guidance from the IRS on this issue, and I personally don't want to fight with them over this. So I don't know HOW you would identify half of the position. But if you don't sell any of the appreciated position for the required 60 day period, the question is moot.

<< I think the real problem boils down to showing that the collar is on "this" half of a financial position, and *not* on "that" half.>>

Right you are. And there are no answers from the IRS on how to "identify" such a position.

<<Same question, different thrust: After the sixty day period has been satisfied, i.e., TP has held half of his appreciated position through the sixty days, what's to stop the IRS from coming back and saying, "No, I'm sorry, the half that you held through the sixty days was not the half that you had the collar around, and the Section 1259 rules have triggered the constructive sale of that half"?>>

Absolutely the laws are written now...and as I interpret them. Again, IRS has given absolutely no guidance on these issues.

<<Is there a "real" way to put the collar around specific shares? Is there a "real" way to attach certain shares to the put and the call that make up the collar? My impression is that puts and calls don't attach, or don't have to attach, to specific shares.>>

Not as far as I know.

<<Thanks, and it would *really* help me to get an answer well before Jan 30!!! >>

This is certainly the best that I have. Sorry it's not much.

TMF Taxes

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