SECTION 4. REGULATIONS TO

BE ISSUED UNDER SECTION 987

.01 In General . The forthcoming proposed section 987 regulations would provide the rules described in this section 4. The forthcoming proposed section 987 regulations would modify the effect of the amortization election to appropriately take into account pretransition gain or loss for short taxable years, including short taxable years resulting from the repeal of section 898(c)(2).

.02 Transition Period . If an election is made under §1.987-10(e)(5)(ii)(A) to recognize pretransition gain or loss ratably over the transition period, then each owner to which the election applies recognizes pretransition gain or loss with respect to each section 987 QBU, original deferral QBU, and outbound loss QBU ratably over 120 months beginning with the first day of the first taxable year in which the section 987 regulations apply, subject to the special rules provided in §1.987-10(e) (5)(ii)(B) (related to transfers described in section 381(a)) and section 4.03 of this notice.

.03 Taxable Years Ending Before November 25, 2025 . For purposes of section 4.02 of this notice, if an owner recognized a ratable portion of its pretransition gain or loss under §1.987-10(e)(5)(ii)(A) in any taxable year to which the rules provided in section 4.02 of this notice did not apply, each such taxable year is deemed to contain twelve months. Thus, for example, if the first taxable year of an owner in which the section 987 regulations apply is a short taxable year ending before November 25, 2025, and the owner recognized one tenth of its pretransition gain or loss in that taxable year under §1.987-10(e)(5) (ii)(A), the owner recognizes its remaining pretransition gain or loss ratably over 108 months beginning with the first day of the next taxable year.