§985 — Functional currency

3 cases·3 cited

Statute Text — 26 U.S.C. §985

(a)In general

Unless otherwise provided in regulations, all determinations under this subtitle shall be made in the taxpayer’s functional currency.

(b)Functional currency

(1)In general

For purposes of this subtitle, the term “functional currency” means—

(A)

except as provided in subparagraph (B), the dollar, or

(B)

in the case of a qualified business unit, the currency of the economic environment in which a significant part of such unit’s activities are conducted and which is used by such unit in keeping its books and records.

(2)Functional currency where activities primarily conducted in dollars

The functional currency of any qualified business unit shall be the dollar if activities of such unit are primarily conducted in dollars.

(3)Election

To the extent provided in regulations, the taxpayer may elect to use the dollar as the functional currency for any qualified business unit if—

(A)

such unit keeps its books and records in dollars, or

(B)

the taxpayer uses a method of accounting that approximates a separate transactions method.

Any such election shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.

(4)Change in functional currency treated as a change in method of accounting

Any change in the functional currency shall be treated as a change in the taxpayer’s method of accounting for purposes of section 481 under procedures to be established by the Secretary.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.985-0 Outline of regulation
Treas. Reg. §Treas. Reg. §1.985-0(a) In general.
Treas. Reg. §Treas. Reg. §1.985-0(b) Certain controlled foreign corporations.
Treas. Reg. §Treas. Reg. §1.985-0(c) All other foreign corporations.
Treas. Reg. §Treas. Reg. §1.985-0(d) Pre-1987 section 902 amounts.
Treas. Reg. §Treas. Reg. §1.985-0(e) Net worth branch.
Treas. Reg. §Treas. Reg. §1.985-0(f) Profit and loss branch.
Treas. Reg. §Treas. Reg. §1.985-1 Functional currency
Treas. Reg. §Treas. Reg. §1.985-1(a) Applicability and effective date—(1) Purpose and scope.
Treas. Reg. §Treas. Reg. §1.985-1(b) Dollar functional currency—(1) In general.
Treas. Reg. §Treas. Reg. §1.985-1(c) Functional currency of a QBU that is not required to use the dollar—(1) General rule.
Treas. Reg. §Treas. Reg. §1.985-1(d) Single functional currency for a foreign corporation—(1) General rule.
Treas. Reg. §Treas. Reg. §1.985-1(e) Translation of nonfunctional currency transactions.
Treas. Reg. §Treas. Reg. §1.985-1(f) Examples.
Treas. Reg. §Treas. Reg. §1.985-1(i) Step 1.
Treas. Reg. §Treas. Reg. §1.985-1(v) A QBU that produces income or loss that is, or is treated as, effectively connected with the conduct of a trade or business within the United States.
Treas. Reg. §Treas. Reg. §1.985-2 Election to use the United States dollar as the functional currency of a QBU
Treas. Reg. §Treas. Reg. §1.985-2(a) Background and scope—(1) In general.
Treas. Reg. §Treas. Reg. §1.985-2(b) Eligible QBU—(1) In general.
Treas. Reg. §Treas. Reg. §1.985-2(c) Time and manner for dollar election—(1) QBUs that are branches of United States persons—(i) Rule.
Treas. Reg. §Treas. Reg. §1.985-2(d) Effect of dollar election—(1) General rule.
Treas. Reg. §Treas. Reg. §1.985-2(i) §1.985-2(i)
Treas. Reg. §Treas. Reg. §1.985-3 United States dollar approximate separate transactions method
Treas. Reg. §Treas. Reg. §1.985-3(a) Scope and effective date—(1) Scope.
Treas. Reg. §Treas. Reg. §1.985-3(b) Statement of method.

3 Citing Cases

The Coca-Cola Company and Subsidiaries, Petitioner · 2020

To satisfy section 985, petitioner must, for each taxable year, translate into dollars the income it has earned in a foreign currency.

Eaton Corporation and Subsidiaries, Petitioner · 2019

The last two steps, made obsolete by the enactment ofsection 985, provided rules for converting a foreign corporation's E&P calculation to U.S.

Estate of Budlong v. Commissioner 8 T.C. 284 · 1947