Section 988 Reporting

Dollar is particularly strong right now especially when compared to the euro or british pound.

Section 988 reporting. Irc section 988 is a tax regulation governing capital losses or gains on investments held in a foreign nonfunctional currency. 988 a 1 a in general except as otherwise provided in this section any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss as the case may be. Use form 8886 to disclose information for each reportable transaction in which participation has occurred.

Each taxpayer that has participated in a reportable transaction and that is required to file a tax return must disclose information for each reportable transaction in which the taxpayer participates. The partnership doesn t have a disclosure requirement because the irc 165 loss of 1 5 million isn t more than 2 million. In the current year the partnership entered into one irc 988 transaction and incurred an irc 165 loss of 1 5 million.

Disclosure of loss reportable transactions. Section 988 losses 50k can be reportable transactions the u s. How do i get tt.

You can opt out of section 988 and select the section 1256. A section 988 transaction relates to section 988 c 1 of the. 988 a 1 b special rule for forward contracts etc.

A in generalthe term section 988 transaction means any transaction described in subparagraph b if the amount which the taxpayer is entitled to receive or is required to pay by reason of such transaction. I have sec 988 income reported on box 11f of my k 1 form 1065. 988 treats most but not all gains and losses from foreign currency transactions as ordinary in character.

An advantage of section 988 treatment is that any amount of ordinary income can be deducted as a loss where only 3 000 in capital gains losses can be deducted. Under section 988 you report gains and losses as interest income or loss with any gain added to your ordinary income from other sources. Taxpayers may have substantial unrealized code 987 and 988 currency losses.