Final Regulations Issued on Recognition and Deferral of Code Sec. 987 Gain or Loss
Final regulations have been issued on transactions of U.S. taxpayers
that have qualified business units (QBUs) with functional currency other
than the U.S. dollar. Specifically, the final regulations:
- cover combinations and separations of QBUs subject to Code Sec. 987 (Reg. 1.987-2 and Reg. 1. 987-4),
recognition and deferral of foreign currency gain or loss with respect
to a QBU subject to Code Sec. 987 in connection with certain QBU
terminations and other transactions involving partnerships (Reg. 1.
- withdraw Temporary regulations that determine a
partner’s share of assets and liabilities of a Code Sec. 987 aggregate
partnership (Temporary Reg. 1.987-7T). In general, the regulations
prevent the selective recognition of Code Sec. 987 gain or loss.
The IRS declined to extend the applicability of these provisions. The
final regulations retain the applicability dates of the temporary
regulations, as extended by IRS guidance. The final regulations under
Reg. 1.987-2 and Reg. 1. 987-4 generally apply to tax years beginning on
or after the day that is three years after the first day of the first
tax year following December 7, 2016. The final regulations under Reg. 1.
987-12 generally apply to any deferral event or outbound loss event
that occurs on or after January 6, 2017.