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Businessman Foresees Chaos In New Hedge Rules.

MAY 20, 1993

Businessman Foresees Chaos In New Hedge Rules.

DATED MAY 20, 1993
DOCUMENT ATTRIBUTES
  • Authors
    McDonald, Michael
  • Institutional Authors
    Goodpasture Inc.
  • Code Sections
  • Index Terms
    hedging transactions, capital assets
    gain or loss
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 93-6717
  • Tax Analysts Electronic Citation
    93 TNT 129-39
====== SUMMARY ======

Mike McDonald of Goodpasture Inc., Enid, Okla., has predicted that the IRS's decision to deny ordinary loss treatment to legitimate hedging transactions "will propel our nation's financial and agricultural futures markets into a chaotic state which will effectively eliminate routine hedging practices -- the very basis of our risk management process."

====== FULL TEXT ======

The Honorable Lloyd Bentsen

 

Secretary of the Treasury

 

15th and Pennsylvania Ave., N.W.

 

Washington, D.C. 20220

Dear Mr. Secretary:

Goodpasture Inc. is extremely troubled about a policy statement issued by the Internal Revenue Service stating that ordinary loss treatment would no longer be allowed for tenable hedging transactions under capital loss rules since the Supreme Court's decision in Arkansas Best v. Commissioner, 485 U.S. 212 (1988).

This interpretation by the IRS will propel our nation's financial and agricultural futures markets into a chaotic state which will effectively eliminate routine hedging practices -- the very basis of our risk management process. Under this IRS interpretation, businesses such as ours, which rely heavily on the futures markets as a hedging mechanism, will be badly hamstrung if this interpretation is allowed. Further, it will put the risk back in farming, banking and every other prudently run business that uses the futures markets. Without the essential risk management tools provided by futures and options markets, we may be forced to forgo new projects or investment opportunities. In addition, the present tax policy on hedging contradicts President Clinton's economic growth proposals, since it will curtail economic growth and eliminate jobs.

As Secretary of the U.S. Treasury, I respectfully ask you to direct the IRS to immediately halt enforcement of its interpretation.

Mike McDonald

 

Goodpasture Inc.

 

Manager

 

Enid, Oklahoma
DOCUMENT ATTRIBUTES
  • Authors
    McDonald, Michael
  • Institutional Authors
    Goodpasture Inc.
  • Code Sections
  • Index Terms
    hedging transactions, capital assets
    gain or loss
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 93-6717
  • Tax Analysts Electronic Citation
    93 TNT 129-39
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