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Section 988 Foreign Currency Gains and Losses: Identifying and Reporting Transactions, Elections and Exceptions

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

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Conducted on Tuesday, November 23, 2021

Recorded event now available

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This webinar will discuss the wide reach of IRC Section 988 and explain the tax treatment of foreign currency transactions on businesses, CFCs, and Americans living abroad. Our panel of international tax experts will cover transactions taxed under Section 988, tax-saving elections, and the exceptions to taxation of nonfunctional currency transactions.


Section 988 rules cover transactions taking place in nonfunctional currency. Foreign currency transactions covered by IRC Section 988 include more than money. For businesses, accounts receivable and payable, derivative, and debt instrument transactions can trigger these gains and losses. For often unwary individuals living abroad, exchanges for stock, cars, and other assets can invoke these gains. Even according to the IRS, "determining whether all IRC 988 transactions due to the disposition of nonfunctional currency have been identified by the taxpayer can be difficult. It is based on the individual facts and circumstances of the case."

At the same time, the consequences of Section 988 are real. These gains and losses are treated as ordinary income and sourced to the residence of the taxpayer. Identifying and reporting CFC Section 988 gains and losses is particularly complex. These gains can be immediately taxable to the U.S. shareholder. For individual taxpayers, IRC Section 988(e)(2)(B) provides an exception for some personal transactions. However, the exception only applies to transactions with gains above $200.

Listen as our panel of international tax experts explains the taxation of foreign currency gains and losses under Section 988. Tax advisers working with multinational businesses and individuals working abroad need to understand the nuances of Section 988.



  1. IRC Section 988: an overview
  2. Transactions covered under Section 988
  3. Applicable taxpayers
    1. Individuals
    2. Businesses
    3. CFCs
  4. Exceptions
  5. Elections
  6. Notable cases


The panel will review these and other key issues:

  • Common scenarios subject to Section 988 treatment
  • Elections available for Subpart F income subject to Section 988
  • Exceptions to Section 988 treatment of gains and losses
  • Mark-to-market treatment of gains and losses from foreign currency exchanges
  • Reporting Section 988 gains and losses


Gifford, Dirk
Dirk Gifford

Managing Director, International Tax Services

Mr. Gifford serves in the firm's International Corporate Services Practice. He focuses on working primarily with...  |  Read More

Skinner, William
William R. Skinner

Fenwick & West

Mr. Skinner focuses his practice on U.S. international taxation, with a particular emphasis on tax planning and...  |  Read More

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