Rev. Rul. 66-97

Advice has been requested regarding the holding period of debentures and as to whether there is a distinction between a trade effected on a registered securities exchange and a trade made in the `over-the-counter' market.

The taxpayer purchased for investment certain debentures on the same day in an `over-the-counter' trade and a trade effected on a registered securities exchange. There are two relevant dates in connection with such security transactions: (1) the `trade date'-the date on which the contract to buy or sell the security is made and (2) the `settlement date'-the date on which the security is delivered and payment is tendered. In many cases settlement takes place a fixed number of days after the trade. In transactions involving bonds, notes or other evidences of indebtedness, the buyer pays the interest accrued on the security to the date of settlement as a part of the consideration for the transfer. However, bonds as well as stocks are considered acquired or sold on the respective `trade dates.' See I.T. 3442, C.B. 1941-1, 212. I.T. 3287, C.B. 1939-1, 138, states that the period during which an asset was held is to be computed by excluding the day on which the asset was acquired and including the day upon which it was sold. See also I.T. 3705, C.B. 1945, 174, and Revenue Ruling 66-7, page 188, this Bulletin. This rule applies whether the trade is made on a registered securities exchange or in the `over-the-counter' market.

Accordingly, the holding period for debentures acquired by purchase, whether on a registered securities exchange or in the `over-the-counter' market, is to be determined by excluding the `trade date' on which the debentures are acquired and including the `trade date' on which the debentures are sold.

The same rule applies generally in determining the holding periods of stocks and securities acquired by purchase.