Final Regs Provide Transition Rules for QBU Branches, Define Weighted Average Exchange Rate

 [4830-01]

 ACTION: Final regulations.

 SUMMARY: This document contains final Income Tax Regulations setting forth transition rules for qualified business unit (QBU) branches of United States persons, and regulations providing the definition of the weighted average exchange rate. Generally, the regulations providing transition rules apply to QBU branches that used a profit and loss or a net worth method of accounting prior to the enactment of the Tax Reform Act of 1986 and do not elect (or are not required) to use the United States dollar approximate separate transactions method for taxable years beginning after December 3l, 1986. Changes to the applicable tax law were made by the Tax Reform Act of 1986. These final regulations provide guidance for taxpayers who must use the statutory profit and loss method of accounting for taxable years beginning after December 31, 1986. Generally, the regulation providing the definition of the weighted average exchange rate defines such exchange rate as the simple average of the daily exchange rates.

 EFFECTIVE DATE: Taxable years beginning on or after October 25, 1991.

 FOR FURTHER INFORMATION CONTACT: Carol Murphy of the Office of Associate Chief Counsel (International), within the Office of Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, Attention: CC:CORP:T:R (INTL-393-88, INTL-964-86 and INTL-472-89) (202-566-6795, not a toll-free call).

SUPPLEMENTARY INFORMATION:

BACKGROUND

This document contains final regulations relating to procedures to be followed by qualified business unit (QBU) branches of United States persons, using a profit and loss or a net worth method of accounting prior to the enactment of Subpart J of the Internal Revenue Code of 1986, and final regulations relating to the definition of the weighted average exchange rate. On June 3, 1988, the Internal Revenue Service published proposed regulations under section 987 of the Internal Revenue Code of 1986 in the Federal Register (53 FR 32405). On August 25, 1988, the Internal Revenue Service published proposed regulations under section 989 of the Internal Revenue Code of 1986 in the Federal Register (53 FR 20651). Two written comments were received. No public hearing was requested or held. After consideration of the comments regarding the proposed regulations, those regulations are adopted by this Treasury Decision with revisions. The comments and revisions are discussed below. On September 20, 1989 the Internal Revenue Service published proposed regulations under section 989 of the Internal Revenue Code of 1986 in the Federal Register (54 FR 38664). No written comments were received. No public hearing was requested or held. Those regulations are adopted by this Treasury Decision without revisions.

EXPLANATION OF PROVISIONS

 The terminology used in the proposed regulations has been changed in some instances. A QBU is now referred to as a QBU branch, capital contribution is now a transfer to a QBU branch, and exchange gain or loss is now a section 987 gain or loss. The post-86 QBU earnings (also referred to in the proposed regulations as the unremitted post-86 functional currency earnings) are now referred to as the post-86 profits pool.

 Sections 1.987-5(c)(2) and 1.989(c)-1(c)(2) provide that the post-86 profits pool and the EQ pool shall be combined for taxable years beginning on or after October 25, 1991. This reduces the complexity of maintaining multiple pools and eases the calculation of section 987 gain or loss upon a remittance. The effect of combining the pools is to average the deferred section 987 gain or loss attributable to all of the unremitted profits and capital of a QBU branch when a remittance is made in a post-1986 tax year.

 Sections 1.987-5(a)(2) and 1.989(c)-1(a)(2) allow taxpayers to apply sections 1.987-5 and 1.989(c)-1 to insolvent QBU branches for taxable years beginning before October 25, 1991 and makes such application mandatory for taxable years beginning on or after October 25, 1991. This expansion has been made because both solvent and insolvent QBU branches will recognize section 987 gain or loss upon termination of the QBU branch.

 These regulations clarify the composition and treatment of the post-86 profits pool. They also provide clarification concerning the dollar basis of the post-86 profits pool.

 These regulations provide that adjustments to the pools must be made for transfers that are not remittances from the QBU branch. It is anticipated that future regulations will provide that a transfer may include all contributions of property to and distributions of property from a QBU branch within a given time period.

 These regulations provide that the district director may allow additional adjustments to prevent the recognition of section 987 gain or loss due to factors unrelated to the movement of exchange rates. Such an adjustment would prevent the recognition of 987 gain or loss from an event that is unrelated to changes in exchange rates.

 One comment received suggested that post-86 contribution transfers should either be kept as a separate pool or included with the post-86 profits pool rather than merging them with the EQ pool, as the temporary regulations provided. As explained above, it was decided instead to consolidate the pools. The other comment suggested that taxpayers be allowed to translate the net change in account balances between a branch and its headquarters at an average rate for the year, and that more specific guidance should be provided with regard to the treatment of an 80/20 corporation operating exclusively through a foreign branch and proper treatment of deemed dividends under section 1.1502-32(f)(2). These issues may be addressed in subsequent regulations under section 987.

 The principles contained in these regulations apply to QBU branches of foreign persons.

 Temporary regulations providing the definition of the weighted average exchange rate are also finalized. No comments were received concerning this regulation and it is finalized without revision.

SPECIAL ANALYSES

 It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, regulations section 1.989(b)-1 was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these final regulations is Carol Murphy of the Office of Associate Chief Counsel (International) within the Office of Chief Counsel, Internal Revenue Service. Other personnel from the Internal Revenue Service and the Treasury Department participated in developing the regulations.

LIST OF SUBJECTS IN 26 CFR SECTIONS 1.985-0 THROUGH 1.989(c)-1T

 Income taxes, Reporting and recordkeeping requirements.

Treasury Decision 8367

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1 -- INCOME TAX; TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 1953

Paragraph 1. The authority for part 1 is amended by removing the citation for sections 1.987-OT, 1.987-IT, 1.989(c)-OT, and 1.989(c)- IT and adding the following citations.

Authority: Section 7805, 68A Stat. 917; 26 U.S.C. 7805 * * * Sections 1.987-1 through 1.987.5 are also issued under 26 U.S.C. 987 * * * Section 1.989(b)-1 is also issued under 26 U.S.C. 989(b). Section 1.989-1(c) is also issued under 26 U.S.C. 989(c) * * *

Par. 2. Sections 1.987-OT and 1.987-IT are removed as of October 25, 1991.

Par. 3. New sections 1.987-1 through 1.987-5 are added to read as follows:

SECTION 1.987-1 PROFIT AND LOSS METHOD OF ACCOUNTING FOR A QUALIFIED BUSINESS UNIT OF A TAXPAYER HAVING A DIFFERENT FUNCTIONAL CURRENCY FROM THE TAXPAYER. [RESERVED]

SECTION 1.987-2 ACCOUNTING FOR GAIN OR LOSS ON CERTAIN TRANSFERS OF PROPERTY. [RESERVED]

SECTION 1.987-3 TERMINATION. [RESERVED]

SECTION 1.987-4 SPECIAL RULES RELATING TO QBU BRANCHES OF FOREIGN TAXPAYERS. [RESERVED]

SECTION 1.987-5 TRANSITION RULES FOR CERTAIN QUALIFIED BUSINESS UNITS USING A PROFIT AND LOSS METHOD OF ACCOUNTING FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987.

(a) APPLICABILITY -- (1) IN GENERAL. This section applies to qualified business unit (QBU) branches of United States persons, whose functional currency (as defined in section 985 of the Code and the regulations thereunder) is other than the United States dollar (dollar) and that used a profit and loss method of accounting for their last taxable year beginning before January 1, 1987. Generally, a profit and loss method of accounting is any method of accounting under which the taxpayer calculates the profits of a QBU branch in its functional currency and translates the net result into dollars. For all taxable years beginning after December 31, 1986, such QBU branches must use the profit and loss method of accounting as described in section 987, except to the extent otherwise provided in regulations under section 985 or any other provision of the Code. See 1.989(c)-1 regarding transition rules for QBU branches of United States persons that have a nondollar functional currency and that used a net worth method of accounting for their last taxable year beginning before January 1, 1987.

(2) INSOLVENT QBU BRANCHES. A taxpayer may apply the principles of this section to a QBU branch that used a profit and loss method of accounting for its last taxable year beginning before January 1, 1987, whose $E pool (as defined in paragraph (d)(3)(i) of this section) is negative. For taxable years beginning on or after October 25, 1991, the principles of this section shall apply to insolvent QBU branches.

(b) GENERAL RULES. Generally, section 987 gain or loss occurs when a QBU branch makes a remittance. A remittance is considered to be made from one or more functional currency pools under rules provided in paragraph (c) of this section. In general, the amount of section 987 gain or loss from a remittance equals the difference between the dollar value of the functional currency adjusted basis of the property remitted and the portion of the dollar basis in the applicable pool. Section 987 gain or loss is calculated under a 4-step procedure described in paragraph (d) of this section. Section 987 gain or loss attributable to a remittance is realized and must be recognized in the taxable year of the remittance except to the extent otherwise provided in regulations.

(c) DETERMINING THE POOL(S) FROM WHICH A REMITTANCE IS MADE -- (1) REMITTANCES MADE DURING TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 1986, AND BEFORE OCTOBER 25, 1991. A remittance made during taxable years beginning after December 31, 1986 and before October 25, 1991, first represents an amount of the QBU branch's post-86 profits pool (including functional currency profits for the current taxable year determined without regard to remittances made during the current year). To the extent the functional currency amount of the remittance exceeds the post-86 profits pool, it is considered to come out of the EQ pool. Paragraph (d)(2) of this section describes the EQ pool and the post-86 profits pool.

(2) REMITTANCES MADE IN TAXABLE YEARS BEGINNING ON OR AFTER OCTOBER 25, 1991. For remittances made in taxable years beginning on or after October 25, 1991, the post-86 profits and EQ pools are combined into one pool called the equity pool. Therefore, remittances made during those taxable years will only come from the equity pool. The dollar basis of, and section 987 gain or loss on, such remittances shall be calculated utilizing the principles set forth in paragraph (d)(4) and (5) of this section.

(d) CALCULATION OF SECTION 987 GAIN OR LOSS -- (1) IN GENERAL. This paragraph (d) describes the 4-step procedure for calculating section 987 gain or loss.

(2) STEP 1 -- CALCULATE THE AMOUNT OF THE FUNCTIONAL CURRENCY POOLS -- (i) EQ POOL. (A) BEGINNING POOL. The beginning amount of the EQ pool is equal to the functional currency adjusted bases of a QBU branch's assets less the functional currency amount of the QBU branch's liabilities at the end of the taxpayer's last taxable year beginning before January 1, 1987, as these amounts are determined under the rules of paragraphs (e) and (f) of this section. The district director may allow for additional adjustments to the beginning amount of the EQ pool to prevent the recognition of section 987 gain or loss due to factors unrelated to the movement of exchange rates.

(B) ADJUSTING THE EQ POOL. The EQ pool is increased by the functional currency amount of any transfer (as determined under section 987) to the QBU branch made during the current taxable year or any prior taxable year beginning after December 31, 1986. If the transfer is made in a nonfunctional currency, this amount is translated into the QBU branch's functional currency at the spot rate (determined under the principles of section 988 and the regulations thereunder) on the date of the transfer. The method for determining the rate must be applied consistently each quarter. The EQ pool is decreased by the functional currency amount of any remittance (as determined under section 987) made during a prior taxable year beginning after December 31, 1986, that is considered remitted from the EQ pool under paragraph (c) of this section. The EQ pool must also be decreased by any transfer from the QBU branch that is not a remittance.

(ii) POST-86 PROFITS POOL. The amount of a QBU branch's post-86 profits pool is calculated at the end of each taxable year beginning after December 31, 1986. The opening balance of the post-86 profits pool at the beginning of the first taxable year beginning after December 31, 1986, is zero. The post-86 profits pool is increased by the functional currency amount of the QBU branch's profits (determined under section 987) for the taxable year. The post-86 profits pool is decreased by the functional currency amount of the QBU branch's losses (determined under section 987) for the taxable year and the amount of any remittances by the QBU branch during the taxable year from the post-86 profits pool as provided under paragraph (c) of this section.

(iii) ADJUSTMENTS TO THE EQUITY POOL. For remittances made in taxable years beginning on or after October 25, 1991 under paragraph (c)(2) of this section, the post-86 profits and EQ pools are combined into one pool called the equity pool. Additions to and subtractions from the equity pool shall be made utilizing the principles of paragraphs (d)(2)(i)(B) and (ii) of this section. For example, remittances shall reduce the equity pool.

(3) STEP 2 -- CALCULATE THE DOLLAR BASIS OF THE POOLS -- (i) DOLLAR BASIS OF THE EQ POOL -- (A) BEGINNING DOLLAR BASIS. The beginning dollar basis of the EQ pool (hereinafter referred to as the $E pool) equals:

(1) The dollar amount of all the QBU branch's profits reported on the taxpayer's income tax returns for taxable years beginning before January 1, 1987, plus the total dollar amount of all transfers to the QBU branch during that period (properly reflected on the taxpayer's books), less

(2) The dollar amount of all the QBU branch's losses reported on the taxpayer's income tax returns for such years, and the total dollar basis of all remittances and all transfers made by the QBU branch during that period (properly reflected on the taxpayer's books).

A QBU branch's profits and losses shall be properly adjusted for foreign taxes of the QBU branch.

(B) ADJUSTING THE $E POOL. The $E pool is increased by the dollar amount of any transfers to the QBU branch made during the current taxable year or any prior taxable year beginning after December 31, 1986. If a transfer is made in a currency other than the dollar, the amount of the currency is translated into dollars at the spot rate (determined under the principles of section 988 and the regulations thereunder) on the date of the transfer. The $E pool is decreased by the dollar basis of any remittance made during a prior taxable year beginning after December 31, 1986, that is considered remitted from the $E pool under paragraphs (c) and (d)(4) of this section. The $E pool is also reduced by the amount of a transfer (other than a remittance) from the QBU branch translated into dollars at the spot rate (determined under the principles of section 988 and the regulations thereunder) on the date of the transfer. The method for determining the spot rate must be applied consistently to all transfers to and from a QBU branch.

(ii) DOLLAR BASIS OF THE POST-86 PROFITS POOL. The amount of a QBU branch's dollar basis in the post-86 profits pool (the $P pool) is calculated at the end of each taxable year beginning after December 31, 1986. The opening balance of the $P pool at the beginning of the first taxable year beginning after December 31, 1986, is zero. The $P pool is increased by the functional currency amount of the QBU branch's profits (determined under section 987) for the taxable year translated into dollars at the weighted average exchange rate (as defined in section 1.989(b)-1) for the year. The $P pool is decreased by the functional currency amount of the QBU branch's losses (determined under section 987) for the taxable year translated into dollars at the weighted average exchange rate for the year and by the dollar basis of any remittances made by the QBU branch during the taxable year from the post-86 profits pool under paragraph (c)(1) of this section.

(iii) Combination of the $E and the $P pools. For taxable years beginning on or after October 25, 1991 the $P and the $E pools are combined into one pool called the basis pool. Additions to and subtractions from the basis pool shall be made utilizing the principles set forth in paragraph (d)(3)(i) and (ii) of this section.

(4) Step 3 -- CALCULATION OF THE DOLLAR BASIS OF A REMITTANCE. For all taxable years beginning after December 31, 1986, the dollar basis of a remittance is calculated using the following formula:

 amount of remittance (in

(i) The dollar amount of the remittance, and

(ii) The dollar basis of the remittance as calculated under paragraph (d)(4) of this section.

(e) FUNCTIONAL CURRENCY ADJUSTED BASIS OF QBU BRANCH ASSETS ACQUIRED IN TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987 -- (1) BASIS OF ASSET. For taxable years beginning after December 31, 1986, the functional currency adjusted basis of a QBU branch asset acquired in a taxable year beginning before January 1, 1987, is the functional currency basis of the asset at the date of acquisition, as adjusted according to United States tax principles. The functional currency adjusted basis of an asset for which a functional currency basis was not determined at the date of acquisition is the nonfunctional currency basis of the asset at the date of acquisition multiplied by the spot exchange rate on the date of acquisition, as adjusted according to United States tax principles.

(2) ADJUSTMENT TO BASIS OF ASSET. Any future adjustments to the functional currency adjusted basis of such an asset are determined with respect to the appropriate functional currency adjusted basis of the asset as determined under this paragraph (e).

(f) FUNCTIONAL CURRENCY AMOUNT OF QBU BRANCH LIABILITIES ACQUIRED IN TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987. For the first taxable year beginning after December 31, 1986, the amount of a QBU branch liability incurred in a taxable year beginning before January 1, 1987, is the functional currency amount of the liability at the date incurred, as adjusted according to United States tax principles. The functional currency amount of a liability for which a functional currency amount was not determined at the date incurred is the nonfunctional currency amount of the liability at the date incurred multiplied by the spot exchange rate on the date incurred, as adjusted according to United States tax principles.

(g) EXAMPLES. The provisions of this section are illustrated by the following examples.

EXAMPLE 1 -- (i) FACTS. U.S. is a domestic corporation. B, a QBU branch of U.S., operates in country X and was established in 1985. B's functional currency is the FC. U.S. is on a calendar taxable year and, prior to January 1, 1987, accounted for the operations of B by the profit and loss method of accounting as set forth in Rev. Rul. 75-107, 1975-1 C.B. 32. B's books and records were kept according to United States tax principles. B received a transfer of $2,000 in 1985, and had profits of $3,000 in 1985 and $5,000 in 1986. B made a remittance in 1986, the dollar basis of which was $1,000. As of December 31, 1986, the adjusted basis of B's functional currency assets exceeded the functional currency amount of its liabilities by 15,000 FC (the beginning pool of EQ). Under section 987, B has profits of 8,000 FC in 1987, which are worth $1,000 when translated at the weighted average exchange rate for 1987 as required by sections 987(2) and 989(b)(4). B has no profits or loss in 1988. There are no transfers to B in 1987 and 1988. B remits 18,000 FC in 1988. Under section 987, the appropriate exchange rate for the 1988 remittance is 10 FC/$1.

(ii) CALCULATION OF SECTION 987 LOSS ON REMITTANCE -- (A) POST-86 PROFITS. Under paragraph (c)(i) of this section, the 18,000 FC remittance comes first out of the post-86 profits pool (8,000 FC) and second out of EQ (10,000 FC). The loss on the 1988 remittance out of the post-86 profits pool equals:

 Dollar value of post-86                Dollar basis of post-86

STEP 1. The total EQ pool equals 15,000 FC (the functional currency adjusted bases of its assets less the functional currency amount of its liabilities as of December 31, 1986). There are no adjustments necessary under paragraph (d)(2)(i)(B) of this section.

STEP 2. The $E pool is $9,000 (the $2,000 transfer in 1985 plus profits of $3,000 in 1985 and $5,000 in 1986 and less the $1,000 dollar basis of the 1986 remittance). There are no adjustments necessary under paragraph (d)(3)(i)(B) of this section.

STEP 3. The entire 10,000 FC remittance is deemed to come out of EQ.

STEP 4. The dollar basis of the EQ remitted equals:

 N x $E determined under paragraph (d)(3)(i)

 Dollar value of       -    Dollar basis of

EXAMPLE 2 -- (i) FACTS. D is a domestic corporation. B, a QBU branch of D, operates in country X. B's functional currency is the FC. At the end of B's last taxable year beginning before [DATE THAT IS 30 DAYS AFTER THE DATE THIS DOCUMENT IS PUBLISHED IN THE FEDERAL REGISTER] B's EQ pool equals 15,000 FC and B's post-86 profits pool equals 8,000 FC. B's $E amount equals $9,000, and the $P pool equals $1,000. In B's first taxable year beginning on or after October 25, 1991, B remits 18,000 FC. Under section 987, the appropriate exchange rate for this remittance is 10FC:$1.

(ii) COMPUTATION OF THE EQUITY POOL.

 15,000 FC         +       8,000 FC                = 23,000 FC

Par. 4. Section 1.989(b)-1T is redesignated as section 1.989(b)-1 and the language "(temporary)" is removed from the section heading.

Par. 5. New section 1.989(c)-1 is added to read as follows:

SECTION 1.989(c)-1 TRANSITION RULES FOR CERTAIN BRANCHES OF UNITED STATES PERSONS USING A NET WORTH METHOD OF ACCOUNTING FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987.

(a) APPLICABILITY -- (1) IN GENERAL. This section applies to qualified business units (QBU) branches of United States persons, whose functional currency (as defined in section 985 of the Code and regulations issued thereunder) is other than the United States dollar (dollar) and that used a net worth method of accounting for their last taxable year beginning before January 1, 1987. Generally, a net worth method of accounting is any method of accounting under which the taxpayer calculates the taxable income of a QBU branch based on the net change in the dollar value of the QBU branch's equity over the course of a taxable year, taking into account any remittance made during the year. QBU branch equity is the excess of QBU branch assets over QBU branch liabilities. For all taxable years beginning after December 31, 1986, such QBU branches must use the profit and loss method of accounting as described in section 987, except to the extent otherwise provided in regulations under section 985 or any other provision of the Code.

(2) INSOLVENT QBU BRANCHES. A taxpayer may apply the principles of this section to a QBU branch that used a net worth method of accounting for its last taxable year beginning before January 1, 1987, whose $E pool (as defined in paragraph (d)(3)(i) of this section) is negative. For taxable years beginning on or after October 25, 1991 the principles of this section shall apply to insolvent QBU branches.

(b) GENERAL RULES. For the general rules, see section 1.987-5(b).

(c) DETERMINING THE POOL(S) FROM WHICH A REMITTANCE IS MADE. To determine from which pool(s) a remittance is made, see section 1.987-5(c).

(d) CALCULATION OF SECTION 987 GAIN OR LOSS -- (1) IN GENERAL. See section 1.987-5(d)(1) for rules to make this calculation.

(2) STEP 1 -- CALCULATE THE AMOUNT OF THE FUNCTIONAL CURRENCY POOLS. For calculation of the amount of the functional currency pools, see section 1.987-5(d)(2).

(3) STEP 2 -- CALCULATE THE DOLLAR BASIS POOLS -- (i) DOLLAR BASIS OF THE EQ POOL -- (A) BEGINNING DOLLAR BASIS. The beginning dollar basis of the EQ pool (hereinafter referred to as the $E pool) equals the final net worth of the QBU branch. Final net worth of the QBU branch equals the QBU branch's equity value (assets less liabilities) measured in dollars at the end of the taxpayer' s last taxable year beginning before January 1, 1987, determined on the basis of the QBU branch's books and records as adjusted according to United States tax principles.

(B) ADJUSTING THE $E POOL. For adjustments to be made to the $E pool, see section 1.987-5(d)(3)(i)(B).

(ii) DOLLAR BASIS OF THE POST-86 PROFITS POOL. To calculate the dollar basis of the post-86 profits pool, see 1.987-5(d)(3)(ii).

(iii) DOLLAR BASIS OF THE EQUITY POOL. To calculate the dollar basis of the equity pool, see 1.987-5(d)(3)(iii).

(4) STEP 3 -- CALCULATION OF THE DOLLAR BASIS OF A REMITTANCE. To calculate the dollar basis of the EQ remitted, see section 1.987-5(d)(4).

(5) STEP 4 -- CALCULATION OF THE SECTION 987 GAIN OR LOSS ON A REMITTANCE. To calculate 987 gain or loss determined on a remittance, see section 1.987-5(d)(5).

(e) FUNCTIONAL CURRENCY ADJUSTED BASIS OF QBU BRANCH ASSETS ACQUIRED IN TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987. To determine the functional currency adjusted basis of QBU branch assets acquired in taxable years beginning before January 1, 1987, see section 1.987-5(e).

(f) FUNCTIONAL CURRENCY AMOUNT OF QBU BRANCH LIABILITIES ACQUIRED IN TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1987. To determine the functional currency amount of QBU branch liabilities acquired in taxable years beginning before January 1, 1987, see section 1.987-5(f).

Par. 6. Sections 1.989(c)-0T and 1.989(c)-1T are removed as of October 25, 1991.