SIA Submits Comments to the IRS on Proposed Guidance on Qualified Covered Call Options

The Committee on Federal Taxation of the Securities Industry Association (SIA)* provides comments to the Internal Revenue Service (IRS) on proposed guidance on qualified covered call options, REG-104641-97. The IRS requested comments on whether equity options with flexible terms should be eligible for qualified covered call treatment under Section 1092(c)(4) of the Internal Revenue Code of 1986, as amended (the Code), relating to the definition of a qualified covered call option.

SIA recommends that:

• flex options should be, and in appropriate cases already are, eligible for treatment as qualified covered call options, and stated expressly in the final regulations;
• the U.S. Department of Treasury has the regulatory authority to extend qualified covered call treatment to over-the-counter options and that Treasury should exercise that authority; and
• proposed regulations dealing with flex options should be made effective for all options, rather than solely for options entered into after the date on which the relevant regulations are finalized.

*SIFMA is the product of a merger between the Securities Industry Association (SIA) and The Bond Market Association (TBMA) in 2006.