Credit: 3.0 Credit Hours Per Session

Part 1: Fundamentals of Taxation of Debt Instruments and Derivatives (Wednesday, October 10) This session will begin with a brief explanation of the business reasons for using financial instruments and an introduction to the tax rules that govern such instruments and transactions. You will then learn the fundamentals of the taxation of debt instruments, including the accrual and determination of original issue discount (OID), as well as the rules relating to market discount and premium. The application of the rules governing variable rate debt instruments (VRDIs) and contingent payment debt instruments(CPDIs) will be explained and demonstrated.  

The second half of this session will provide you with a practical explanation of the economics and taxation of a variety of derivatives, including options, notional principal contracts (swaps), forward contracts, and futures. Short sales and securities lending transactions also will be addressed. Finally, you will learn about the application of mark-to-market rules of §1256 of the Internal Revenue Code (IRC), as well as the rules governing the settlement of derivatives (e.g., IRC §1234A).