FROM THE OFFICE OF PUBLIC AFFAIRS
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August 27, 2004
JS-1878
Treasury Issues Final Regulations on Certain Foreign Currency Instruments
Today the Treasury Department issued final regulations providing detailed rules on the tax treatment of contingent payment debt instruments denominated in one or more foreign currencies.
Existing regulations provide guidance on the tax treatment of non-contingent debt instruments denominated in a foreign currency, and on contingent payment debt instruments not denominated in any foreign currency. These final regulations fill the gap between the existing sets of rules.
The final regulations reflect modest changes that respond to comments received on the proposed regulations. The final regulations follow the proposed regulations' general approach of applying the "non-contingent bond method" under section 1275 to a debt instrument in the instrument's denomination currency. The resulting amounts are then translated into the taxpayer's functional currency, and gain or loss is determined, under rules similar to the existing rules for non-contingent debt instruments that are denominated in a foreign currency.
The final regulations apply to debt instruments issued 60 or more days after the regulations are published in the Federal Register.
The text of the final regulations is attached.
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