The recent US tax court decision in the Bank One case underscores the urgent need for the finalization of regulations regarding a safe harbour valuation method that could be used by securities dealers, thus removing uncertainty for taxpayers. As background, one should also consider the nature of the income derived when derivatives, especially swaps, are held or disposed of by securities dealers. After an introduction, this article considers: capital or ordinary income: Section 1221; valuation of gain and loss: Section 475; proposed regulations: Section 1.475(a)(4), and election and record keeping.