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ARTICLE · 08 OCTOBER 2015

IRS Issues Final Regulations Related To Foreign Currency Hedging Transactions

Grant Thornton LLP
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The final regulations provide for the treatment of an integrated transaction when the taxpayer disposes of or otherwise terminates all or a portion of the QDI or the hedge before maturity.

United StatesTax
Mel Schwarz
Mel Schwarz
Dustin Stamper
Dustin Stamper
Shamik Trivedi
Shamik Trivedi
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The IRS issued final regulations ( T.D. 9736) on Sept. 18 related to certain hedging transactions under Treas. Reg. Sec. 1.988-5. The final regulations replace temporary regulations without substantial change.

The final regulations allow, under Treas. Reg. Sec. 1.988-5, for the integration of a qualifying debt instrument (QDI) and a hedge if certain requirements are met. The QDI must meet the definition under Treas. Reg. Sec. 1.988-5(a)(3), and a hedge must meet the definition under Treas. Reg. Sec. 1.988-5(a)(4). If a transaction qualifies, the QDI and the hedge are integrated and treated as a single transaction under Treas. Reg. Sec. 1.988-5(a)(9). Neither the QDI nor the hedge is subject to the straddle rules (Sections 263(g) or 1092) or Section 1256 during the period in which the transactions are integrated.

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