988 transaction

988 transaction

A 988 transaction refers to [http://www2.law.cornell.edu/uscode/uscode26/usc_sec_26_00000988----000-.html 26 USCA section 988] of the Internal Revenue Code in the United States of America. This transaction occurs when a taxpayer enters into or acquires any forward contract, futures contract, option, or similar financial instrument held in a foreign currency. [ [http://www2.law.cornell.edu/uscode/uscode26/usc_sec_26_00000988----000-.html 26 USCA section 988] ] It shall not apply to any regulated futures contract or non-equity options which would be marked to market under [http://www2.law.cornell.edu/uscode/search/display.html?terms=1256&url=/uscode/html/uscode26/usc_sec_26_00001256----000-.html 26 USCA § 1256] (1256 contract) if held on the last day of the taxable year. [ [http://www2.law.cornell.edu/uscode/uscode26/usc_sec_26_00000988----000-.html 26 USCA section 988] ]

History

The tax reforms of 1986 instituted the provisions covering 988 transactions. [ [http://www.nysscpa.org/cpajournal/1996/0996/depts/intertax.htm NY CPA Journal] ]

Application

The gain or loss on a 988 transaction is treated as ordinary income or loss unless an election is made to treat it as a capital gain or loss. [ [http://www2.law.cornell.edu/uscode/uscode26/usc_sec_26_00000988----000-.html 26 USCA section 988] ]

Impact

ee also

*International taxation
*Foreign tax credit

References

External links

* [http://www.irs.gov/irb/2007-21_IRB/ar14.html IRS publication]


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