Tax Shelters: A Major-Minor Mishap

foreign exchangeThe federal government has committed significant resources to battling tax shelters and has enjoyed some significant successes. Last week, however, the government stumbled in a foreign currency shelter case, Wright v. Comm’r, 2016 U.S. App. LEXIS 126 (6th Cir. Jan. 7, 2016). Wright involved a “major-minor” arrangement, which uses offsetting foreign currency options in conjunction with the mark-to-market rules of Section 1256 of the Internal Revenue Code to create tax losses. These transactions are labeled “major-minor” because one of the options involves a “major” currency, meaning there is regulated futures trading for that currency, while the other involves a “minor” currency that is not the subject of regulated futures trading.… Read More