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ARTICLE · 27 SEPTEMBER 2012

IRS Issues Temporary Regulations For Integrated Foreign Currency Hedging Transactions

Grant Thornton LLP
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The IRS has issued temporary regulations (T.D. 9598) under Section 988 related to integrated transactions that involve foreign currency denominated debt under Treas. Reg. Sec 1.988-5.

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Grant Thornton'S Washington National Tax Office
Grant Thornton'S Washington National Tax Office
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The IRS has issued temporary regulations (T.D. 9598) under Section 988 related to integrated transactions that involve foreign currency denominated debt under Treas. Reg. Sec 1.988-5. Specifically, T.D. 9598 amends the regulation existing under Treas. Reg. Sec. 1.988-5(a)(6)(ii) related to "leg-out transactions" of an integrated transaction under Treas. Reg. 1.988-5.

Section 988 and the regulations thereunder provide the treatment for certain foreign currency transactions (Section 988 transactions). Section 988(d)(1) provides that if any Section 988 transaction is part of a Section 988 hedging transaction, all transactions that are part of such Section 988 hedging transaction will be integrated into a single transaction to the extent provided in regulations. A Section 988 hedging transaction is defined in Section 988(d)(2) as any transaction:

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