SECTION 29. FUNCTIONAL

CURRENCY (§ 985)

.01 Change in functional currency . (1) Description of change . This change applies to a taxpayer that wants to change its functional currency or the functional currency of a qualified business unit (QBU) of the taxpayer. The preceding sentence does not apply to a QBU of a taxpayer described in § 1.985–1(b)(1)(iii).

(2) Manner of making change . A taxpayer making this change must make all necessary adjustments required by such change. See §§ 1.985–5, 1.985–8(c). A taxpayer must attach a statement to the Form 3115 representing that it has made the adjustments set forth in § 1.985–5 or § 1.985–8(c). The statement must also provide the amount of any unrealized exchange gain or loss required to be taken into account pursuant to § 1.985–5 or § 1.985–8(c) and the date on which a taxpayer took such amount into account. Finally, the statement must provide a detailed and complete description of any other adjustments required pursuant to § 1.985–5 or § 1.985–8(c).

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 29.01 of this APPENDIX is “70.” See section 6.02(4) of this revenue procedure. (4) Contact information . For further information regarding a change under this section, contact Peter Merkel at 202–622–3870 (not a toll-free call).

.02 Reserved .

January 24, 2011 419 2011–4 I.R.B.

ing to comply with § 1281 for interest income on short-term obligations.

(b) Under § 1281, a holder of certain short-term obligations, including a bank as defined in § 581, must include in gross income any accrued interest income on such obligations, regardless of the holder’s overall method of accounting. Section 1281 applies to all types of interest income, including acquisition discount, original issue discount (OID), and stated interest. See S. Rep. No. 99–313, 99 ^th Cong., 2d Sess. 903 (1986), 1986–3 (Vol. 3) C.B. 903. (c) Section 1283(a)(1) generally defines a short-term obligation as any bond, debenture, note, certificate, or other evidence of indebtedness that matures in one year or less from its issue date.

(d) Under §§ 1281(a) and 1283(c), a holder of a short-term obligation subject to § 1281 must include in gross income an amount equal to the sum of the daily portions of the acquisition discount or OID, whichever is applicable, on the obligation for each day during the taxable year that the obligation is held by the holder. See § 1283(b), as modified by § 1283(c), to determine the daily portions of acquisition discount or OID. In addition, § 1281(a) requires the holder to include in gross income any stated interest that is payable on the short-term obligation (other than stated interest taken into account to determine the amount of the acquisition discount or OID) as it accrues.

(2) Section 481(a) adjustment period . A taxpayer must take the entire § 481(a) adjustment into account in computing taxable income for the year of change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 33.01 of this APPENDIX is “74.” See section 6.02(4) of this revenue procedure. (4) Contact information . For further information regarding a change under this section, contact William E. Blanchard at 202–622–3950 (not a toll-free call). .02 Stated interest on short-term loans of cash method banks .

(1) Description of change . This change applies to a bank that uses the cash receipts and disbursements (cash) method of accounting as its overall accounting method and that wants to change its method of accounting from accruing stated interest

(7) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 31.01 of this APPENDIX is “72.” See section 6.02(4) of this revenue procedure. (8) Contact information . For further information regarding a change under this section, contact William E. Blanchard at 202–622–3950 (not a toll-free call).

.02 Reserved .