Seventh Circuit Decides Appeal of Bank One Mark-to-Market Swap Valuation Tax Case

On August 9, 2006, the New York office authored an Alert Memorandum entitled, “Seventh Circuit Decides Appeal of Bank One Mark-to-Market Swap Valuation Tax Case.” This five-page memo describes the Seventh Circuit’s decision earlier today in the Bank One case, dealing with the mark-to-market valuation of a dealer’s swaps portfolio for tax purposes. Although the taxpayer lost its appeal in Bank One, on balance, we believe that the case actually will be modestly helpful to most securities dealers confronting audit challenges in respect of their mark-to-market valuations of their portfolios of open derivatives positions, for the reasons discussed in the memorandum.