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CHAPTER 1— NORMAL TAXES AND SURTAXES›Subchapter N— Tax Based on Income From Sources Within or Without the United States›PART III— INCOME FROM SOURCES WITHOUT THE UNITED STATES›Subpart J— Foreign Currency Transactions

§ 987. Branch transactions

26 U.S.C. Subtitle A — Income Taxes (Internal Revenue Code) · 2026 edition · updated 2026-10-03 · United States

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.)

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▸Contents — 26 U.S.C. Subtitle A — Income Taxes (Internal Revenue Code)
26 U.S.C. Subtitle A — Income Taxes (Internal Revenue Code)

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