Par. 2. Sections 1.263(g)-1, 1.263(g)-2, 1.263(g)-3, 1.263(g)-4, and 1.263(g)-5 are added to read as follows:
(a) Definition of personal property. For purposes of section 263(g) and of §§ 1.263(g)-1 through 1.263(g)-5, personal property means property, whether or not actively traded, that is not real property. For purposes of the preceding sentence, a position in personal property may itself be property. In general, however, a position in personal property is not property of a taxpayer unless the position confers or may confer substantial rights on the taxpayer.
(1) Application to certain financial instruments. Personal property includes a stockholder's ownership of common stock, a holder's ownership of a debt instrument, and either party's position in a forward contract or in a conventional swap agreement. Personal property does not include a position that imposes obligations but does not confer substantial rights on the taxpayer. Therefore, the obligor's position in a debt instrument generally is not personal property, even though the obligor may have typical rights of a debtor, such as the right to prepay the debt. However, the obligor on a debt instrument has a position in any personal property underlying the debt instrument. See § 1.1092(d)-1(d).
(2) Options. For the purposes of applying this section, a put option or call option imposes obligations but does not confer substantial rights on the grantor, whether or not the option is cash-settled.
(b) Example.
The following example illustrates the rules stated in paragraph (a) of this section:
Example. (i) Facts. A purchases 100 ounces of gold at a cost of $ x . A transfers the 100 ounces of gold to a trust that issues multiple classes of trust certificates and is treated as a partnership for tax purposes. In return, A receives two trust certificates that are not personal property of a type that is actively traded within the meaning of section 1092(d)(1). One certificate entitles A to a payment on termination of the trust at the end of four years equal to the value of the 100 ounces of gold up to a maximum value of $( x + y ). The other certificate entitles A to a payment equal to the amount by which the value of 100 ounces of gold exceeds $( x + y ) on termination of the trust. A sells the second certificate and keeps the first certificate.
(ii) Analysis. The trust certificate retained by A is property that is not real property. In addition, ownership of the trust certificate confers certain substantial rights on A . Therefore, although the trust certificate is not personal property of a type that is actively traded, A 's interest in the trust certificate is personal property for purposes of section 263(g).