Sec. 1.987-0 Section 987; table of contents.
This section lists captioned paragraphs contained in §§ 1.987-1 through 1.987-11.
§1.987-1 Scope, definitions and special rules.
(a) In general.
(b) Scope of section 987 and definitions.
(1) Taxpayers subject to section 987.
(2) Definition of section 987 QBU.
(3) Definition of an eligible QBU.
(4) Definition of owner.
(5) Section 987 aggregate partnership.
(6) [Reserved].
(7) Examples illustrating paragraph (b) of this section.
(c) Exchange rates.
(1) Spot rate.
(2) Yearly average exchange rate.
(3) Historic rate.
(d) Marked item.
(e) Historic item.
(f) [Reserved].
(g) Elections.
(1) In general.
(2) Exceptions to the general rules.
(3) Manner of making elections.
(4) No change in method of accounting.
(5) Revocation of an election.
§1.987-2 Attribution of items to eligible QBUs; definition of a transfer and related rules.
(a) Scope and general principles.
(b) Attribution of items to an eligible QBU.
(1) General rules.
(2) Exceptions for non-portfolio stock, interests in partnerships, and certain acquisition indebtedness.
(3) Adjustments to items reflected on the books and records.
(4) Assets and liabilities of a section 987 aggregate partnership or DE that are not attributed to an eligible QBU.
(c) Transfers to and from section 987 QBUs.
(1) In general.
(2) Disregarded transactions.
(3) Transfers of assets to and from section 987 QBUs owned through section 987 aggregate partnerships.
(4) Transfers of liabilities to and from section 987 QBUs owned through section 987 aggregate partnerships.
(5) Acquisitions and dispositions of interests in DEs and section 987 aggregate partnerships.
(6) Changes in form of ownership.
(7) Application of general tax law principles.
(8) Interaction with §1.988-1(a)(10).
(9) Certain disregarded transactions not treated as transfers.
(10) Examples.
(d) Translation of items transferred to a section 987 QBU.
(1) Marked items.
(2) Historic items.
(e) Effective/applicability date.
(1) In general.
(2) Certain disregarded transactions not treated as transfers.
§1.987-3 Determination of section 987 taxable income or loss of an owner of a section 987 QBU.
(a) In general.
(b) Determination of each item of income, gain, deduction, or loss in the section 987 QBU’s functional currency.
(1) In general.
(2) Translation of items of income, gain, deduction, or loss that are denominated in a nonfunctional currency.
(3) Determination in the case of a section 987 QBU owned through a section 987 aggregate partnership.
(4) [Reserved].
(c) Translation of items of income, gain, deduction, or loss of a section 987 QBU into the owner’s functional currency.
(1) In general.
(2) Exceptions.
(3) Adjustments to COGS required under the simplified inventory method.
(d) [Reserved].
(e) Examples.
§1.987-4 Determination of net unrecognized section 987 gain or loss of a section 987 QBU.
(a) In general.
(b) Calculation of net unrecognized section 987 gain or loss.
(c) Net accumulated unrecognized section 987 gain or loss for all prior taxable years.
(1) In general.
(2) Coordination with section 1.987-12.
(d) Calculation of unrecognized section 987 gain or loss for a taxable year.
(1) Step 1: Determine the change in the owner functional currency net value of the section 987 QBU for the taxable year.
(2) Step 2: Increase the amount determined in step 1 by the amount of assets transferred from the section 987 QBU to the owner.
(3) Step 3: Decrease the amount determined in steps 1 and 2 by the amount of assets transferred from the owner to the section 987 QBU.
(4) Step 4: Decrease the amount determined in steps 1 through 3 by the amount of liabilities transferred from the section 987 QBU to the owner.
(5) Step 5: Increase the amount determined in steps 1 through 4 by the amount of liabilities transferred from the owner to the section 987 QBU.
(6) Step 6: Decrease or increase the amount determined in steps 1 through 5 by the section 987 taxable income or loss, respectively, of the section 987 QBU for the taxable year.
(7) Step 7: Increase the amount determined in steps 1 through 6 by any expenses that are not deductible in computing the section 987 taxable income or loss of the section 987 QBU for the taxable year.
(8) Step 8: Decrease the amount determined in steps 1 through 7 by the amount of any tax-exempt income.
(e) Determination of the owner functional currency net value of a section 987 QBU.
(1) In general.
(2) Translation of balance sheet items into the owner’s functional currency.
(f) Combinations and separations.
(1) Combinations.
(2) Separations.
(3) Examples.
(g) Examples.
(h) Effective/applicability date.
(1) In general.
(2) Combinations and separations.
§1.987-5 Recognition of section 987 gain or loss.
(a) Recognition of section 987 gain or loss by the owner of a section 987 QBU.
(b) Remittance proportion.
(c) Remittance.
(1) Definition.
(2) Day when a remittance is determined.
(3) Termination.
(d) Aggregate of all amounts transferred from the section 987 QBU to the owner for the taxable year.
(e) Aggregate of all amounts transferred from the owner to the section 987 QBU for the taxable year.
(f) Determination of owner’s adjusted basis in transferred assets.
(1) In general.
(2) Marked asset.
(3) Historic asset.
(g) Example.
§1.987-6 Character and source of section 987 gain or loss.
(a) Ordinary income or loss.
(b) Character and source of section 987 gain or loss.
(1) In general.
(2) Method required to characterize and source section 987 gain or loss.
(3) Coordination with section 954.
(4) [Reserved].
(c) Examples.
§1.987-7 Section 987 aggregate partnerships.
(a) In general.
(b) [Reserved].
(c) Coordination with subchapter K.
§1.987-8 Termination of a section 987 QBU.
(a) Scope.
(b) In general.
(1) Trade or business ceases.
(2) Substantially all assets transferred.
(3) Owner no longer a CFC.
(4) Owner ceases to exist.
(c) Transactions described in section 381(a).
(1) Liquidations.
(2) Reorganizations.
(d) [Reserved].
(e) Effect of terminations.
(f) Examples.
§1.987-9 Recordkeeping requirements.
(a) In general.
(b) Supplemental information.
(c) Retention of records.
(d) Information on a dedicated section 987 form.
§1.987-10 Transition rules.
(a) Scope.
(b) Fresh start transition method.
(1) In general.
(2) Application of §1.987-4.
(3) Determination of historic rate.
(4) Example.
(c) Transition of section 987 QBUs that applied the method set forth in the 2006 proposed section 987 regulations.
(1) In general.
(2) Application of §1.987-4.
(3) Use of prior historic rate.
(4) Example.
(d) Adjustments to avoid double counting.
(e) Reporting.
(1) In general.
(2) Attachments not required where information is reported on a form.
§1.987-11 Effective/applicability date.
(a) In general.
(b) Application of these regulations to taxable years beginning after December 7, 2016.
(c) Transition date.
§1.987-12 Deferral of section 987 gain or loss.
(a) In general.
(1) Overview.
(2) Scope.
(3) Exceptions.
(b) Gain and loss recognition in connection with a deferral event.
(1) In general.
(2) Deferral event.
(3) Gain or loss recognized under §1.987-5 in the taxable year of a deferral event.
(4) Successor QBU.
(c) Recognition of deferred section 987 gain or loss in the taxable year of a deferral event and in subsequent taxable years.
(1) In general.
(2) Recognition upon a subsequent remittance.
(3) Recognition of deferred section 987 loss in certain outbound successor QBU terminations.
(4) Special rules regarding successor QBUs.
(d) Loss recognition upon an outbound loss event.
(1) In general.
(2) Outbound loss event.
(3) Loss recognized upon an outbound loss event.
(4) Adjustment of basis of stock received in certain nonrecognition transactions.
(5) Recognition of outbound section 987 loss that is not converted into stock basis.
(e) Source and character.
(1) Deferred section 987 gain or loss and certain outbound section 987 loss.
(2) Outbound section 987 loss reflected in stock basis.
(f) Definitions.
(1) Controlled group.
(2) Qualified successor.
(g) Anti-abuse.
(h) Examples.
(i) Coordination with fresh start transition method.
(1) In general.
(2) Adjustment to deferred section 987 gain or loss.
(3) Adjustments in the case of an outbound loss event.
(j) Applicability date.
(1) In general.
(2) Exceptions.
[Added by T.D. 9794, 81 FR 88806-88852, Dec. 8, 2016; amended by T.D. 9795, 81 FR 88854-88880, Dec. 8, 2016; T.D. 9857, 84 FR 20790-20801, May 13, 2019; corrected at 84 FR 31194, July 1, 2019.]
