Revisiting Tax Considerations Regarding Credit Default Swaps

This article provides an update on current tax thinking and practice regarding credit default swaps, focusing on the effects of changes in the market since the Internal Revenue Service solicited further information about credit default swaps in Notice 2004-52. Changes in the state of the economy may influence the characterization of credit default swaps for federal income tax purposes. This article explores both the revised characterization issue and some of the practical tax complexities.