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(a) Applicability and effective date.

(b) Dollar functional currency.

(c) Functional currency of a QBU that is not required to use the dollar.

(d) Single functional currency for a foreign corporation.

(e) Translation of nonfunctional currency transactions.

(f) Examples.

§1.985–2 Election to use the United States dollar as the functional currency of a QBU.

(a) Background and scope.

(b) Eligible QBU.

(c) Time and manner for dollar election.

(d) Effect of dollar election.

§1.985–3 United States dollar approximate separate transactions method.

(a) Scope and effective date.

(b) Statement of method.

(c) Translation into United States dollars.

(d) Computation of DASTM gain or loss.

(e) Effect of DASTM gain or loss on gross income, taxable income, or earnings and profits.

§1.985–4 Method of accounting.

(a) Adoption or election.

(b) Condition for changing functional currencies.

(c) Relationship to certain other sections of the Code.

§1.985–5  Adjustments required upon change in functional currency.

(a) In general.

(b) Step 1—Taking into account exchange gain or loss on certain section 988 transactions.

(c) Step 2—Determining the new functional currency basis of property and the new functional currency amount of liabilities and any other relevant items.

(d) Step 3A—Additional adjustments that are necessary when a branch changes functional currency.

(e) Step 3B—Additional adjustments that are necessary when a taxpayer changes functional currency.

(f) Examples.

Section 1.985–6  Transition rules for a QBU that uses the dollar approximate separate transactions method for its first taxable year beginning in 1987.

(a) In general.

(b) Certain controlled foreign corporations.

(c) All other foreign corporations.

(d) Pre-1987 section 902 amounts.

(e) Net worth branch.

(f) Profit and loss branch.