Page:United States Statutes at Large Volume 100 Part 3.djvu/781

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2589

"(i) The acquisition of a debt instrument or becoming the obligor under a debt instrument. "(ii) Accruing (or otherwise taking into account) for purposes of this subtitle any item of expense or gross income or receipts which is to be paid or received after the date on which so accrued or taken into account, "(iii) Entering into or acquiring any forward contract, futures contract, option, or similar financial instrument if such instrument is not marked to market at the close of the taxable year under section 1256. The Secretary may prescribe regulations excluding from the application of clause (ii) any class of items the taking into account of which is not necessary to carry out the purposes of this section by reason of the small amounts or short periods involved, or otherwise. "(C) SPECIAL RULES FOR DISPOSITION OF NONFUNCTIONAL CURRENCY.—

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"(i) IN GENERAL.—In the case of any disposition of any nonfunctional currency— "(I) such disposition shall be treated as a section 988 transaction, and "(II) for purposes of determining the foreign currency gain or loss from such transaction, paragraphs (1) and (2) of subsection (b) shall be applied by substituting 'acquisition date' for 'booking date' and 'disposition' for 'payment date', "(ii)

NONFUNCTIONAL CURRENCY.—For purposes

of

this section, the term 'nonfunctional currency' includes coin or currency, and nonfunctional currency denomi,„ nated demand or time deposits or similar instruments issued by a bank or other financial institution. "(2) BOOKING DATE.—The term 'booking date' means— "(A) in the case of a transaction described in paragraph dXBXi), the date of acquisition or on which the taxpayer becomes the obligor, "(B) in the case of a transaction described in paragraph (IXBXii), the date on which accrued or otherwise taken into account, or "(C) in the case of a transaction described in paragraph •- (IXBXiii), the date on which the position is entered into or acquired. "(3) PAYMENT DATE.—The term 'payment date' means— "(A) in the case of a transaction described in paragraph -' (I)(B)(i) or (ii), the date on which payment is made or received, or "(B) in the case of a transaction described in paragraph (l)(B)(iii), the date payment is made or received or the ';,< date the taxpayer's rights with respect to the position are terminated. "(4) DEBT INSTRUMENT.—The term 'debt instrument' means a bond, debenture, note, or certificate or other evidence of indebt edness. To the extent provided in regulations, such term shall include preferred stock. "(d) TREATMENT OF 988 HEDGING TRANSACTIONS.—

"(1) IN GENERAL.—To the extent provided in regulations, if any section 988 transaction is part of a 988 hedging transaction, all transactions which are part of such 988 hedging transaction

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