Rev. Rul. 86-8

1986-1 C.B. 295, 1986-4 I.R.B. 6.

REGULATED FUTURES CONTRACTS; NONEQUITY OPTION

Published: January 27, 1986

  Regulated futures contracts; nonequity option. An option on the High Technology Index of the Pacific Stock Exchange is nonequity option for purposes of section 1256 of the Code.

ISSUE

  Whether an option on the High Technology Index of the Pacific Stock Exchange is a nonequity option within the meaning of section 1256(g)(3) of the Internal Revenue Code.

LAW

  Section 1256 of the Code prescribes special rules for reporting gains and losses from 'section 1256 contracts.'

  Section 1256(b) defines the term 'section 1256 contract' as any regulated futures contract, any foreign currency contract, any nonequity option, and any dealer equity contract.

  Section 1256(g)(3) of the Code provides that the term 'nonequity option' means any listed option which is not an equity option.

  Section 1256(g)(6)(B) of the Code provides that the term 'equity option' does not include any option with respect to any group of stocks or stock index if-

  (i) there is in effect a designation by the Commodities Futures Trading Commission of a contract market for a contract based on such group of stocks or index, or

  (ii) the Secretary determines that such option meets the requirements of law for such a designation.

HOLDING

  The Internal Revenue Service has determined that an option on the High Technology Index of the Pacific Stock Exchange is a nonequity option within the meaning of section 1256(g)(3) of the Code.

Rev. Rul. 86-8, 1986-1 C.B. 295, 1986-4 I.R.B. 6.