Page:United States Statutes at Large Volume 100 Part 3.djvu/777

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2585

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'dual consoUdated loss' means any net operating loss of a domestic corporation which is subject to an income tax of a foreign country on its income without regard to whether such income is from sources in or outside of such foreign country, or is subject to such a tax on a fi" r 3 residence basis. "(B) SPECIAL RULE WHERE LOSS NOT USED UNDER FOREIGN

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- . LAW.—To the extent provided in regulations, the term 'dual c consolidated loss' shall not include any loss which, under ,, . the foreign income tax law, does not offset the income of any foreign corporation." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to net operating losses for taxable years beginning after December 31, 1986.

Subtitle F—Foreign Currency Transactions SEC. 1261. TREATMENT OF FOREIGN CURRENCY TRANSACTIONS.

(a) GENERAL RULE.—Part III of subchapter N of chapter 1 is amended by adding at the end thereof the following new subpart:

"Subpart J—Foreign Currency Transactions ->f '•'

"Sec. 985. Functional currency. "Sec. 986. Determination of foreign corporanon's earnings and profits and foreign taxes. "Sec. 987. Branch transactions. "Sec. 988. Treatment of certain foreign currency transactions. "Sec. 989. Other definitions and special rules.

"SEC. 985. FUNCTIONAL CURRENCY.

"(a) IN GENERAL.—Unless otherwise provided in regulations, all determinations under this subtitle shall be made in the taxpayer's functional currency. "(b) FUNCTIONAL CURRENCY.—

"(1) IN GENERAL.—For purposes of this subtitle, the term 'functional currency' means— "(A) except as provided in subparagraph (B), the dollar, or "(B) in the case of a qualified business unit, the currency of the economic environment in which a significant part of such unit's activities are conducted and which is used by such unit in keeping its books and records. "(2) FUNCTIONAL CURRENCY WHERE ACTIVITIES PRIMARILY CONDUCTED IN DOLLARS.—The functional currency of any qualified

1 business unit shall be the dollar if activities of such unit are primarily conducted in dollars. "(3) ELECTION.—To the extent provided in regulations, the taxpayer may elect to use the dollar as the functional currency for any qualified business unit if— "(A) such unit keeps its books and records in dollars, or "(B) the taxpayer uses a method of accounting that

approximates a separate transactions method. Any such election shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.

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