26 U.S.C. § 1234A

Gains or losses from certain terminations

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Gain or loss attributable to the cancellation, lapse, expiration, or other termination of—(1) a right or obligation (other than a securities futures contract, as defined in section 1234B) with respect to property which is (or on acquisition would be) a capital asset in the hands of the taxpayer, or(2) a section 1256 contract (as defined in section 1256) not described in paragraph (1) which is a capital asset in the hands of the taxpayer,shall be treated as gain or loss from the sale of a capital asset. The preceding sentence shall not apply to the retirement of any debt instrument (whether or not through a trust or other participation arrangement).(Added Pub. L. 97–34, title V, § 507(a), Aug. 13, 1981, 95 Stat. 333; amended Pub. L. 97–448, title I, § 105(e), Jan. 12, 1983, 96 Stat. 2387; Pub. L. 98–369, div. A, title I, § 102(e)(4), (9), July 18, 1984, 98 Stat. 624, 625; Pub. L. 105–34, title X, § 1003(a)(1), Aug. 5, 1997, 111 Stat. 909; Pub. L. 106–554, § 1(a)(7) [title IV, § 401(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–648; Pub. L. 107–147, title IV, § 412(d)(1)(A), Mar. 9, 2002, 116 Stat. 53.)Editorial NotesAmendments

2002—Pars. (1) to (3). Pub. L. 107–147 inserted “or” at end of par. (1), struck out “or” at end of par. (2), and struck out par. (3) which read as follows: “a securities futures contract (as so defined) which is a capital asset in the hands of the taxpayer,”.

2000—Par. (1). Pub. L. 106–554, § 1(a)(7) [title IV, § 401(b)(1)], inserted “(other than a securities futures contract, as defined in section 1234B)” after “right or obligation”.

Par. (3). Pub. L. 106–554, § 1(a)(7) [title IV, § 401(b)(2)–(4)], added par. (3).

1997—Par. (1). Pub. L. 105–34 substituted “property” for “personal property (as defined in section 1092(d)(1))”.

1984—Pub. L. 98–369, § 102(e)(9), inserted at end “The preceding sentence shall not apply to the retirement of any debt instrument (whether or not through a trust or other participation arrangement).”

Par. (2). Pub. L. 98–369, § 102(e)(4), substituted “a section 1256 contract” for “a regulated futures contract”.

1983—Pub. L. 97–448 inserted reference to a regulated futures contract (as defined in section 1256) not described in paragraph (1) which is a capital asset in the hands of the taxpayer.

Statutory Notes and Related SubsidiariesEffective Date of 2002 Amendment

Amendment by Pub. L. 107–147 effective as if included in the provisions of the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by Pub. L. 106–554], to which such amendment relates, see section 412(e) of Pub. L. 107–147, set out as a note under section 151 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, § 1003(a)(2), Aug. 5, 1997, 111 Stat. 910, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to terminations more than 30 days after the date of the enactment of this Act [Aug. 5, 1997].”

Effective Date of 1984 Amendment

Amendment by section 102(e)(4) of Pub. L. 98–369 applicable to positions established after July 18, 1984, in taxable years ending after that date, except as otherwise provided, and amendment by section 102(e)(9) of Pub. L. 98–369, applicable as if included in the amendment made by section 507(a) of Pub. L. 97–34, as amended by section 105(e) of Pub. L. 97–448, see section 102(f), (g) of Pub. L. 98–369, set out as a note under section 1256 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Effective Date

Section applicable to property acquired and positions established by the taxpayer after June 23, 1981, in taxable years ending after such date, and applicable when so elected with respect to property held on June 23, 1981, see section 508 of Pub. L. 97–34, set out as a note under section 1092 of this title.

Notes of Decisions

Cited in 6 cases (1 in the last 5 years), 1998–2023 · leading case: Pilgrim's Pride Corp. v. Comm'r, 779 F.3d 311 (5th Cir. 2015).

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Pilgrim's Pride Corp. v. Comm'r, 779 F.3d 311 (5th Cir. 2015). · cites it 6× “The Commissioner ■ argues that § 1234A(2) is not superfluous because it ensures that “gain or loss from a deemed termination by offset[ 7 ] will be treated as gain or loss from the sale of a capital asset.” This argument fails for two reasons.”

Freda v. Comm'r of Internal Revenue, 656 F.3d 570 (7th Cir. 2011). · cites it 2× “Finally, looking to 26 U.S.C. § 1234A, which treats as capital gain income attributable to the termination of certain rights or obligations, they contended that Pizza Hut made the settlement payment to terminate C & F's rights under the confidentiality agreement the parties…”

Est. of Andrew J. McKelvey v. Commr. of Internal Revenue, 906 F.3d 26 (2d Cir. 2018). · cites it 2× “See 26 U.S.C. § 1234A(1). 12 With respect to the claimed long-term capital gain, the Tax Court ruled that the amended contracts did not result in the constructive sale of the collateralized Monster shares under 26 U.”

James Alderson v. United States, 686 F.3d 791 (9th Cir. 2012). “Section 1234A Finally, Appellants contend that the increase in value between 1993 and 2003 is a capital gain under 26 U.S.C. § 1234A. That section provides: Gain or loss attributable to the cancellation, lapse, expiration, or other termination of a right or obligation with…”

Jonathan P. Wolff & Margaret A. Wolff v. Comm'r of Internal Revenue, 148 F.3d 186 (2d Cir. 1998). “The Holly partners were able to exploit this loophole until 1981, when Congress unequivocally closed the loop by enacting 26 U.S.C. § 1234A. CONCLUSION Because there was no “sale or exchange” when Holly canceled the contracts at issue, the resulting losses should be classified…”

Est. of Andrew J. McKelvey, Bradford G. Peters (Tax Ct. 2023). · cites it 2× “The Second Circuit remanded for us to determine whether the exchanges terminated D’s underlying obligations with respect to the first set of VPFCs for purposes of 26 U.S.C. § 1234A and, if so, the amount of D’s gain from the termination.”

— 26 U.S.C. § 1234A(1) — 2 cases

Pilgrim's Pride Corp. v. Comm'r, 779 F.3d 311 (5th Cir. 2015). “The Commissioner ■ argues that § 1234A(2) is not superfluous because it ensures that “gain or loss from a deemed termination by offset[ 7 ] will be treated as gain or loss from the sale of a capital asset.” This argument fails for two reasons.”

Est. of Andrew J. McKelvey v. Commr. of Internal Revenue, 906 F.3d 26 (2d Cir. 2018). “See 26 U.S.C. § 1234A(1). 12 With respect to the claimed long-term capital gain, the Tax Court ruled that the amended contracts did not result in the constructive sale of the collateralized Monster shares under 26 U.”

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.