Page:United States Statutes at Large Volume 100 Part 3.djvu/780

 100 STAT. 2588

PUBLIC LAW 99-514—OCT. 22, 1986

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"(III) in the case of any corporation, partnership, trust, or estate which is not a United States person, a country other than the United States. "(ii) EXCEPTION.—In the case of a qualified business unit of any taxpayer (including an individual), the residence of such unit shall be the country in which the principal place of business of such qualified business unit is located. "(C) SPECIAL RULE FOR CERTAIN RELATED PARTY LOANS.—

Except to the extent provided in regulations, in the case of a loan by a United States person or a related person to a 10percent owned foreign corporation which is denominated in a currency other than the dollar and bears interest at a rate at least 10 percentage points higher than the Federal mid-term rate (determined under section 1274(d)) at the W^iVi time such loan is entered into, the following rules shall apply: "(i) For purposes of section 904 only, such loan shall V '• be marked to market on an annual basis. "(ii) Any interest income earned with respect to such loan for the taxable year shall be treated as income from sources within the United States to the extent of .1 any loss attributable to clause (i). r- For purposes of this subparagraph, the term 'related ,. -. person' has the meaning given such term by section 954(d)(3), except that such section shall be applied by substituting 'United States person' for 'controlled foreign corporation' each place such term appears. "(D) 10-PERCENT OWNED FOREIGN CORPORATION.—The term '10-percent owned foreign corporation' means any foreign J corporation in which the United States person owns directly or indirectly at least 10 percent of the voting stock. "(b) FOREIGN CURRENCY GAIN OR LOSS.—For purposes of this section— "(1) FOREIGN CURRENCY GAIN.—The term 'foreign currency gain' means any gain from a section 988 transaction to the extent such gain does not exceed gain realized by reason of V changes in exchange rates on or after the booking date and before the payment date. "(2) FOREIGN CURRENCY LOSS.—The term 'foreign currency loss' means any loss from a section 988 transaction to the extent such loss does not exceed the loss realized by reason of changes in exchange rates on or after the booking date and before the payment date. "(c) OTHER DEFINITIONS.—For purposes of this section— v;i

"(1) SECTION 988 TRANSACTION.—

"(A) IN GENERAL.—The term 'section 988 transaction' means any transaction described in subparagraph (B) if the ' amount which the taxpayer is entitled to receive (or is required to pay) by reason of such transaction— •'• '. "(i) is denominated in terms of a nonfunctional currency, or "(ii) is determined by reference to the value of 1 or qlii-.^ I more nonfunctional currencies. "(B)

DESCRIPTION OF TRANSACTIONS.—For purposes

of

subparagraph (A), the following transactions are described in this subparagraph:

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