§ 1221. Capital asset defined
(a)
In general
For purposes of this subtitle, the term “capital asset” means property held by the taxpayer (whether or not connected with his trade or business), but does not include—
(1)
stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business;
(2)
property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section
167, or real property used in his trade or business;
(3)
a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by—
(4)
accounts or notes receivable acquired in the ordinary course of trade or business for services rendered or from the sale of property described in paragraph (1);
(5)
a publication of the United States Government (including the Congressional Record) which is received from the United States Government or any agency thereof, other than by purchase at the price at which it is offered for sale to the public, and which is held by—
(6)
any commodities derivative financial instrument held by a commodities derivatives dealer, unless—
(b)
Definitions and special rules
(1)
Commodities derivative financial instruments
For purposes of subsection (a)(6)—
(A)
Commodities derivatives dealer
The term “commodities derivatives dealer” means a person which [1] regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business.
(B)
Commodities derivative financial instrument
(i)
In general
The term “commodities derivative financial instrument” means any contract or financial instrument with respect to commodities (other than a share of stock in a corporation, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section
1256 contract (as defined in section
1256
(b))), the value or settlement price of which is calculated by or determined by reference to a specified index.
(ii)
Specified index
The term “specified index” means any one or more or any combination of—
which is based on any current, objectively determinable financial or economic information with respect to commodities which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.
(2)
Hedging transaction
(A)
In general
For purposes of this section, the term “hedging transaction” means any transaction entered into by the taxpayer in the normal course of the taxpayer’s trade or business primarily—
(i)
to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer,
(B)
Treatment of nonidentification or improper identification of hedging transactions
Notwithstanding subsection (a)(7), the Secretary shall prescribe regulations to properly characterize any income, gain, expense, or loss arising from a transaction—
[1] So in original. Probably should be “who”.