Proposed revenue procedure
Under the proposed revenue procedure contained in Notice 2013-48 [PDF 42 KB], if a taxpayer realizes a loss upon a redemption of certain money market fund shares and the amount of the loss is not more than a specified percentage—5%— of the taxpayer’s basis in such shares, the IRS will treat such loss as not realized in a wash sale.
Thus, the IRS proposes a de minimis exception to the wash sale rules for certain redemptions of shares of money market funds that, under regulations proposed by the Securities and Exchange Commission (SEC), would no longer maintain a constant share price.
According to the IRS, the proposed revenue procedure is intended to mitigate tax compliance burdens that may result from proposed SEC changes* to the rules that govern the prices at which certain money market fund shares are issued and redeemed.
*The Securities and Exchange Commission (SEC) in June 2013 issued proposed regulations to effect these changes.
The IRS explained that the cost basis reporting rules in sections 6045, 6045A and 6045B have exceptions for money market funds that maintain a constant net asset value and that these exceptions will not be applicable to floating net asset value money market funds. However, the proposed SEC changes will not be applicable to retail money market funds. The IRS noted that most investors in floating net asset value funds are expected to be exempt recipients, which will reduce reporting obligations for transactions in floating net asset value money market funds.
The IRS drafted today’s proposed revenue procedure as if the SEC already has adopted final rules addressing floating net asset value in substantially the same form as the proposed rules. Notice 2013-48 provides that I the SEC does not adopt as final the changes in substantially the same form as they have been proposed, the proposed revenue procedure may not be adopted or may be adopted in materially modified form.
Comments concerning the proposed revenue procedure are due on or before October 28, 2013.