MFA agrees with the Notice’s recognition that any guidance “will target specific abusive transactions, will minimize compliance burdens, and will respect market expectations with respect to conventional, long-established tax planning that is consistent with the intent of Congress.”
MFA further suggests:
- Any guidance should address the specific concerns identified in the Notice without disrupting ordinary-course investment activity or established market practices.
- The Treasury’s concerns regarding hindsight capital elections should be addressed through a tailored rule requiring an election to be made before the time that the taxpayer disposes of the position.
- Mixed-character positions commonly arise in transactions not described in the Notice and do not, standing alone, justify broader changes to the identified straddle rules
- Changes to the existing rules governing notional principal contracts would have implications that reach well beyond the concerns described in the Notice.
