PUBLIC LAW 100-647—NOV. 10, 1988 102 STAT. 3717

SEC. 6130. TREATMENT OF CERTAIN INSTRUMENTS UNDER FOREIGN CUR-
RENCY RULES.

(a) GENERAL RuLE.~-Clause (iii) of section 988(cXlXB) of the 1986

Code (as amended by title I) is amended by striking out "unless such
instrument would be marked to market under section 1256 if held
on the last day of the taxable year".

(b) SPECIAL RULES.—Paragraph (1) of section 988(c) of the 1986
Code is amended by adding at the end thereof the following new
subparagraphs:

"(D) EXCEPTION FOR CERTAIN INSTRUMENTS MARKED TO

MARKET.—

"(i) IN GENERAL.—Clause (iii) of subparagraph (B)
shall not apply to any regulated futures contract or
nonequity option which would be marked to market
under section 1256 if held on the last day of the taxable
year,
"(ii) ELECTION our.—

"(I) IN GENERAL.—The taxpayer may elect to
have clause (i) not apply to such taxpayer. Such an
election shall apply to contracts held at any time
during the taxable year for which such election is
made or any succeeding taxable year unless such
election is revoked with the consent of the
Secretary.

"(II) TIME FOR MAKING ELECTION.—Except as pro-
vided in regulations, an election under subclause
(I) for any taxable year shall be made on or before
the 1st day of such taxable year (or, if later, on or
before the 1st day during such year on which the
taxpayer holds a contract described in clause (i)).
"(Ill) SPECIAL RULE FOR PARTNERSHIPS, ETC.—In
the case of a partnership, an election under
subclause (I) shall be made by each partner sepa-
rately. A similar rule shall apply in the case of an
S corporation.

"(iii) TREATMENT OF CERTAIN PARTNERSHIPS.—This
subparagraph shall not apply to any income or loss of a
partnership for any taxable year if such partnership
made an election under subparagraph (EXiiiXV) for
such year or any preceding year.
"(E) SPECIAL RULES FOR CERTAIN FUNDS.—

"(i) IN GENERAL.—In the case of a qualified fund,
clause (iii) of subparagraph (B) shall not apply to any
instrument which would be marked to market under
section 1256 if held on the last day of the taxable year
(determined after the application of clause (iv)).

"(ii) SPECIAL RULE WHERE ELECTING PARTNERSHIP DOES
NOT QUALIFY.—If any partnership made an election
under clause (iiiXV) for any taxable year and such
partnership has a net loss for such year or any succeed*
ing year from instruments referred to in clause (i), the
rules of clauses (i) and (iv) shall apply to any such loss
year whether or not such partnership is a qualified
fund for such year.