Cross-border Tax Talks

Finally final: The US Section 987 FX regs

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Rebecca Lee, an International Tax Principal in PwC’s Washington National Tax Services practice. Rebecca specializes in financial transactions and digital assets and is one of the most frequent guests on the podcast. Doug and Rebecca discuss the long-awaited final and proposed regulations under Section 987, which deal with foreign currency gain or loss for qualified business units (QBUs). They dive into key topics, including methods for calculating 987 gains and losses, the transition rules, applicability dates, and the implications of different election options. They also cover major changes from the proposed to final regulations, including adjustments to the treatment of Section 988 transactions within a QBU, tax accounting considerations, the controversial suspended loss rules, and how partnerships are impacted.  

Timestamps:

• 01:45 – Anything you’ve been watching, favorite new show? 
• 03:35 – What is code Section 987? Why does it exist? 
• 05:05 – What are the methods for calculating section 987? Can you remind us how to calculate the gain or loss? 
• 07:50 – How do the various elections work? 
• 08:35 – What are the transitions rules and why do we need them? 
• 10:10 – What are the applicability dates? 
• 12:05 – What is Section 988?  
• 12:05 – How is 988 impacted by 987? 
• 13:00 – How do these rules work when you trigger up 988 transactions in the context of 987? 
• 16:10 – Did they make any changes around the calculations themselves? 
• 17:50 – What about remittance and the remittance proportion calculations? 
• 18:30 – Why are the suspended lose rules controversial?  
• 23:00 – What do the final regulations say about the character and source of Section 987 gain or loss? 
• 25:40 – How do these 987 rules apply to partnerships? 
• 28:55 – How are net investment hedges treated? 
• 30:40 – What are the tax accounting implications? 
• 31:45 – What about the recognition of deferred taxes?  
• 35:05 – What is the recurring transfer group election? 
• 37:30 – Any closing thoughts here on what the change of administration might mean for these rules? 

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