Par. 3. In § 1.212-1, paragraph (q) is added to read as follows:
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(q) Notional principal contract payments —(1) Amounts taken into account by an individual pursuant to § 1.446-3(d)(1) (including mark-to-market deductions) with respect to a notional principal contract as defined in § 1.446-3(c)(1)(i), are ordinary and necessary, and are deductible to the extent these amounts are paid or incurred in connection with the production or collection of income. However, this section will not apply to any amount representing interest expense on the deemed loan component of a significant nonperiodic payment as described in § 1.446-3(g)(4). For any loss arising from a termination payment as defined in § 1.446-3(h)(1), see section 1234A and the regulations thereunder. For the timing of deductions with respect to notional principal contracts, see § 1.446-3.
(2) Effective date. Paragraph (q) of this section is applicable to notional principal contracts entered into on or after 30 days after the date a Treasury decision based on these proposed regulations is published in the Federal Register .