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AICPA REQUESTS CLARIFICATIONS ON THE DEFINITION OF FUNCTIONAL CURRENCY.

SEP. 6, 1988

AICPA REQUESTS CLARIFICATIONS ON THE DEFINITION OF FUNCTIONAL CURRENCY.

DATED SEP. 6, 1988
DOCUMENT ATTRIBUTES
  • Authors
    Lerner, Herbert J.
  • Institutional Authors
    American Institute of Certified Public Accountants
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    foreign currency gain or loss
    foreign currency contract
    section 988 transaction
    tax home
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 88-7522
  • Tax Analysts Electronic Citation
    88 TNT 184-39

 

=============== SUMMARY ===============

 

The Tax Division of the American Institute of Certified Public Accountants (AICPA) has commented on six specific sections of the proposed foreign currency regulations. The AICPA claims that subsections (F) and (G) of section 1.985-1T(c)(2)(i) require further explanation: how does the duration of the QBU affect the determination of the economic environment? The CPAs contend that examples (3) and (7) of subsection (f) contradict the rule of section 1.985-1T(c)(5). That rule is that, as to a QBU having its residence outside the U.S., the currency of the QBU for purposes of U.S. generally accepted accounting principles (GAAP) will ordinarily be accepted as the functional currency of the QBU for income tax purposes, provided that the GAAP determination is based on facts and circumstances substantially similar to those identified in section 1.985-1T(c)(2).

The AICPA labels the language of section 1.985-2T(c)(1)(ii) "extremely unclear," and asks for clarification. As to section 1.985- 2T(c)(2)(i), the CPAs raise these questions: what happens if there is more than one U.S. shareholder who is eligible to make the election? Can a 20-percent U.S. shareholder bind a 40-percent U.S. shareholder of a controlled foreign corporation? He again requests clarification.

DOCUMENT ATTRIBUTES
  • Authors
    Lerner, Herbert J.
  • Institutional Authors
    American Institute of Certified Public Accountants
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    foreign currency gain or loss
    foreign currency contract
    section 988 transaction
    tax home
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 88-7522
  • Tax Analysts Electronic Citation
    88 TNT 184-39
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