[Code of Federal Regulations]
[Title 26, Volume 10]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.985-0]

[Page 539-540]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.985-0  Outline of regulation.

    This section lists the paragraphs contained in Sec. Sec. 1.985-1 
through 1.985-6.

                   Sec. 1.985-1 Functional currency.

    (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.

Sec. 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.

  Sec. 1.985-3 United States dollar approximate separate transactions 
                                 method.

    (a) Scope and effective date.
    (b) Statement of method.

[[Page 540]]

    (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.

                   Sec. 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.

 Sec. 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.

[T.D. 8263, 54 FR 38653, Sept. 20, 1989, as amended by T.D. 8464, 58 FR 
232, Jan. 5, 1993; T.D. 8556, 59 FR 37672, July 25, 1994]