SECTION 5. EXAMPLES

The following examples illustrate the application of this revenue procedure:

.01 Example 1 . X is both a dealer in securities and a dealer in physical commodities. In a business unrelated to its commodities dealing business, X is a trader in commodity derivatives. With respect to the commodity trading business, X has made a mark-to-market election under § 475(f)(2) but has not made the commodity dealer election under § 475(e). X makes the valuation safe harbor election under § 1.475(a)–4.

Because X is a dealer in securities, X is an eligible taxpayer within the meaning of § 1.475(a)–4(c)(1). Accordingly, X ’s securities are eligible positions with respect to X, and, if all other requirements are met, may be covered by the valuation safe harbor. Because X has not made the election under § 475(e), however, X is not described in § 1.475(a)–4(c)(2). For that reason, X ’s commodity positions are not eligible positions with respect to X, and the positions in the commodity trading business (which are marked to market pursuant to § 475(f)) are not covered by the valuation safe harbor.

.02 Example 2 . Y is a dealer in commodities and is a trader in securities but is not a dealer in securities. Y makes the elections under § 475(e) (the commodity dealer election), under § 475(f) (the election to apply § 475 to its securities trading business), and under § 1.475(a)–4 (the valuation safe harbor election).

Because Y is an eligible taxpayer described in § 1.475(a)–4(c)(2), Y ’s commodity positions are eligible positions with respect to Y . Although Y also marks to market the securities held in connection

2007–26 I.R.B. 1493 June 25, 2007

garding this revenue procedure, contact Marsha Ann Sabin or John W. Rogers III at (202) 622–3950 (not a toll-free call).

with Y ’s securities trading business, those securities are not eligible positions with respect to Y because Y is not an eligible taxpayer described in § 1.475(a)–4(c)(1).