As such, moving average crossovers should be confirmed with other signals to avoid
whipsaws and false readings.
Eliminating Whipsaws Arising from the Interest-Rate Differential Is the Goal Regardless of the Label
Hence, the Institute urges the Department of the Treasury and IRS to reconsider their administrative interpretations of sections 6402 and 6601(f) to permit comprehensive netting in a much wider variety of situations to eliminate the whipsaws that taxpayers may face from the interest-rate differential.
Furthermore, the approach should allay concerns about whipsaws by either the government or the taxpayer because all of the information necessary to allocate the hedging gains and losses will be available on the return and related workpapers.
Although an identification requirement for the hedge transaction or property is justified to prevent whipsaws against the government, TEI questions whether identification of the hedged item is necessary.(24) Taxpayers engaged in regular day-to-day hedging of constantly shifting positions have, by necessity, devised standardized identification procedures for their hedge transactions.
To avoid
whipsaws against the government when a taxpayer's internal cost of funds falls below the selected AFR, the election should be deemed an accounting method requiring consent of the Commissioner to change.
A principal purpose of section 446(e) is to prevent such "whipsaws" and potential income distortions.
The ruling is not necessary to protect the fisc against "whipsaws" or income distortion; indeed, it can create a taxpayer-adverse "whipsaw" or distortion.
