26 U.S.C. § 987

Branch transactions

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In the case of any taxpayer having 1 or more qualified business units with a functional currency other than the dollar, taxable income of such taxpayer shall be determined—(1) by computing the taxable income or loss separately for each such unit in its functional currency,(2) by translating the income or loss separately computed under paragraph (1) at the appropriate exchange rate, and(3) by making proper adjustments (as prescribed by the Secretary) for transfers of property between qualified business units of the taxpayer having different functional currencies, including—(A) treating post-1986 remittances from each such unit as made on a pro rata basis out of post-1986 accumulated earnings, and(B) treating gain or loss determined under this paragraph as ordinary income or loss, respectively, and sourcing such gain or loss by reference to the source of the income giving rise to post-1986 accumulated earnings.(Added Pub. L. 99–514, title XII, § 1261(a), Oct. 22, 1986, 100 Stat. 2586; amended Pub. L. 100–647, title I, § 1012(v)(1)(B), Nov. 10, 1988, 102 Stat. 3528.)Editorial NotesAmendments

1988—Par. (4). Pub. L. 100–647 struck out par. (4) which provided for translation of foreign income taxes paid by each qualified business unit of the taxpayer in the same manner as provided under section 986(b).

Statutory Notes and Related SubsidiariesEffective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1261(e) of Pub. L. 99–514, set out as a note under section 985 of this title.

Notes of Decisions

Cited in 2 cases, 2009–2009 · leading case: Valero Energy Corp. v. United States

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Valero Energy Corp. v. United States (2009) ca7 “In 2002, shortly after the acquisition was completed, Valero realized $105 million in tax-deductible foreign currency losses (under 26 U.S.C. §§ 987 , 988) through a complicated series of transactions implemented with Arthur Anderson’s help.”

Valero Energy Corporation v. United States (2009) ca7 “In 2002, shortly after the acquisition was completed, Valero realized $105 million in tax-deductible foreign currency losses (under 26 U.S.C. §§ 987 , 988) through a complicated series of transactions implemented with Arthur Anderson’s help.”

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