PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2587
"(3) by making proper adjustments (as prescribed by the Secretary) for transfers of property between qualified business units of the taxpayer having different functional currencies, including— "(A) treating post-1986 remittances from each such unit as made on a pro rata basis out of post-1986 accumulated earnings, and "(B) treating gain or loss determined under this paragraph as ordinary income or loss, respectively, and sourcing such gain or loss by reference to the source of the income giving rise to post-1986 accumulated earnings, and "(4) by translating foreign income taxes paid by each qualified business unit of the taxpayer in the same manner as provided under section 986(b).
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"SEC. 988. TREATMENT OF CERTAIN FOREIGN CURRENCY TRANSACTIONS. "(a) GENERAL RULE.— liBi "(1) TREATMENT AS ORDINARY INCOME OR LOSS.—
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"(A) IN GENERAL.—Except as otherwise provided in section, any foreign currency gain or loss attributable section 988 transaction shall be computed separately treated as ordinary income or loss (as the case may
this to a and be).
"(B) SPECIAL RULE FOR FORWARD CONTRACTS, ETC.—Except
as provided in regulations, a taxpayer may elect to treat any foreign currency gain or loss attributable to a forward contract, a futures contract, or option described in subsection (c)(l)(B)(iii) which is a capital asset in the hands of the taxpayer and which is not a part of a straddle (within the meaning of section 1092(c), without regard to paragraph (4) thereofi as capital gain or loss (as the case may be) if the taxpayer makes such election and identifies such transaction before the close of the day on which such transaction is entered into (or such earlier time as the Secretary may prescribe).
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"(2) GAIN OR LOSS TREATED AS INTEREST FOR CERTAIN PUR-
POSES.—To the extent provided in regulations, any amount treated as ordinary income or loss under paragraph (1) shall be treated as interest income or expense (as the case may be). "(3) SOURCE.—
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"(A) IN GENERAL.—Except as otherwise provided in regulations, in the case of any amount treated as ordinary income or loss under paragraph (1) (without regard to _ i „. paragraph (1)(B)), the source of such amount shall be determined by reference to the residence of the taxpayer or the qualified business unit of the taxpayer on whose books the asset, liability, or item of income or expense is properly n reflected. i^if "(B) R E S I D E N C E. — For purposes of t h i s subpart — gi ly "(i) IN GENERAL.—The residence of any person shall be— 'iim iBs' "(I) in the case of an individual, the country in which such individual's tax home (as defined in •. i ic, n section 911(d)(3)) is located, "(II) in the case of any corporation, partnership, trust, or estate which is a United States person (as ^, .L defined in section 7701(a)(30)), the United States, and
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