1. Short title (a) Short title This Act may be cited as the Modernization of Derivatives Tax Act of 2017 . (b) Amendment of 1986 Code Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. 2. Modernization of tax treatment of certain derivatives (a) In General Subchapter E of chapter 1 is amended by adding at the end the following new part: IV Tax treatment of derivatives and similar contracts Subpart A. Derivatives Subpart B. Similar contracts A Derivatives Sec. 491. Rules for treatment of derivatives. Sec. 492. Investment hedging units. Sec. 493. Derivative defined. 491. Rules for treatment of derivatives (a) In general For purposes of this title, if there is a taxable event with respect to a derivative or an underlying investment— (1) notwithstanding any other provision of this title, except as provided in subsection (b)(3)(A) or section 1032, gain or loss shall be recognized and taken into account in the taxable year in which the taxable event occurs, and (2) proper adjustment shall be made in the amount of any subsequent gain or loss for gain or loss taken into account by reason of paragraph (1). (b) Rules relating to gain or loss Notwithstanding any other provision of this title— (1) Character and source of gain or loss (A) Character Except as provided in paragraph (3)(B), any item of income, deduction, gain, or loss taken into account under subsection (a) with respect to a taxable event shall be treated as— (i) ordinary income or loss, and (ii) attributable to a trade or business of the taxpayer for purposes of sections 62(a) and 172(d)(4). (B) Source of gain or loss from derivatives In the case of a taxable event with respect to a derivative, any item of income, deduction, gain, or loss taken into account under subsection (a) shall be treated as derived from sources within the