### Question
How is the "foreign currency contract" defined?


### Answer
The term **foreign currency contract** is defined in *26 U.S.C. § 1256* as follows -

> a contract—


(i) which requires delivery of, or the settlement of which depends on the value of, a foreign currency which is a currency in which positions are also traded through regulated futures contracts,


(ii) which is traded in the interbank market, and


(iii) which is entered into at arm's length at a price determined by reference to the price in the interbank market

#### Citation:
  - *26 U.S.C. § 1256*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter P-Capital Gains and Losses > PART IV-SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES**

