### Question
Can you define what built-in loss means?


### Answer
**Built-in loss** is defined as the following in *26 U.S.C. § 1258*:

> the loss (if any) which would have been realized if the position had been disposed of or otherwise terminated at its fair market value as of the time such position became part of the conversion transaction

#### Citation:
  - *26 U.S.C. § 1258*
  - 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**

