Navigating Section 988 Foreign Currency Transaction Reporting Rules for Options, Straddles and Hedges

Utilizing Elections and Avoiding Traps in Foreign Currency Options, Section 1092 Contracts, and Other Transactions

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, September 20, 2016

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide a comprehensive guide to reporting foreign currency transactions. The panel will outline the ground rules under IRC Section 988, and discuss scenarios where the taxpayer may elect out of ordinary income treatment.

The panel will also give practical tools to navigating the complex rules governing foreign currency. The event will discuss the US federal income tax consequences of individuals who hold foreign currency, invest in foreign stock and bonds, foreign currency futures or other derivatives, and will offer guidance on when a taxpayer might need to complete Form 8886 to disclose a reportable transaction arising from a foreign currency loss.

Description

The mechanics of reporting foreign currency transactions presents significant complexity for U.S. taxpayers whose functional currency is the U.S. dollar, as well as planning opportunities for their advisers.

This panel will discuss the tax consequences of various transactions involving foreign currency including the tax treatment of investments in and dispositions of foreign currency; the tax treatment of debt instruments denominated in or the value of which is determined by foreign currency; and the tax consequences of derivative transactions involving foreign currency.

The panel will also discuss the "reportable transaction" rules as it pertains to foreign currency transactions. Tax advisers serving clients with foreign currency assets should be well-versed in the shelter rules to avoid costly tax penalties and unnecessary IRS scrutiny of foreign currency losses.

As the rules pertaining to foreign currency are extraordinarily complex, the panel will discuss the tax consequences of such instruments through an examples and explanation approach.

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Outline

  1. Background to Transactions Involving Foreign Currency
  2. Section 988 Transactions
  3. Exceptions, Limitations, and Qualifications to Section 988 Transactions
  4. Character Rules
  5. Sourcing Rules
  6. Reportable Transaction Rules
  7. Examples and Explanations

Benefits

The panel will discuss these and other important questions:

  • How was foreign currency taxed prior to Section 988?
  • How is foreign currency taxed after the enactment of Section 988?
  • What is functional currency?
  • If an individual buys foreign currency for personal transactions, do these rules really apply?
  • How are debt instruments denominated in foreign currency taxed?
  • How are derivative instruments the value of which is linked to foreign currency taxed?
  • What is the character of gain or loss attributable to fluctuations in foreign currency?
  • When can you elect out of the default character rules?
  • How do you elect out?
  • What are the sourcing rules pertaining to foreign currency?
  • What is a qualifying hedging transaction?
  • How do these rules intersect with other Code provisions such as Sections 1256, 1092, or 475?
  • When do the reportable transaction rules apply?

Faculty

Gray, Armin
Armin Gray

Managing Partner
Gray Tolub

Mr. Gray's practice is focused on tax controversy, IRS Offshore Voluntary Disclosure programs, FATCA, and...  |  Read More

Smith, Dean
Dr. Dean Smith

Partner
Cadesky Tax

Dr. Smith's practice focuses on international tax and corporate tax. He is President of The British Canadian...  |  Read More

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