Increased compliance burden under new sec. 987 prop. regs.

Tax Adviser, The, July, 2007 by Keil, Trinity

In September 2006, the IRS issued new proposed regulations (REG-208270-86, 9/7/06) (2006 Prop. Regs.) that provide guidance under Sec. 987 in determining foreign currency gains and losses of qualified business units (QBUs) operating in a functional currency other than their owner's. The 2006 Prop. Regs. are a drastic change from the 1991 proposed regulations (1991 Prop. Regs.) and, if finalized as currently written, would impose significant recordkeeping and tax compliance burdens.

Compliance Requirements

In general, the 2006 Prop. Regs. are proposed to apply starting with the first tax year beginning one year after the first day of the tax year following the date the rules are adopted as final. It is not anticipated that the new rules would be...

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