# 26 U.S.C. § 989: Other definitions and special rules

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s989>. Cite pinpoints as 26 U.S.C. § 989(a)(1).

## § 989(a) Qualified business unit

For purposes of this subpart, the term “qualified business unit” means any separate and clearly identified unit of a trade or business of a taxpayer which maintains separate books and records.

## § 989(b) Appropriate exchange rate

Except as provided in regulations, for purposes of this subpart, the term “appropriate exchange rate” means—

**§ 989(b)(1)** in the case of an actual distribution of earnings and profits, the spot rate on the date such distribution is included in income,

**§ 989(b)(2)** in the case of an actual or deemed sale or exchange of stock in a foreign corporation treated as a dividend under section 1248, the spot rate on the date the deemed dividend is included in income,

**§ 989(b)(3)** in the case of any amounts included in income under section 951(a)(1)(A) or 1293(a), the average exchange rate for the taxable year of the foreign corporation, or

**§ 989(b)(4)** in the case of any other qualified business unit of a taxpayer, the average exchange rate for the taxable year of such qualified business unit.

For purposes of the preceding sentence, any amount included in income under section 951(a)(1)(B) shall be treated as an actual distribution made on the last day of the taxable year for which such amount was so included.

## § 989(c) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subpart, including regulations—

**§ 989(c)(1)** setting forth procedures to be followed by taxpayers with qualified business units using a net worth method of accounting before the enactment of this subpart,

**§ 989(c)(2)** limiting the recognition of foreign currency loss on certain remittances from qualified business units,

**§ 989(c)(3)** providing for the recharacterization of interest and principal payments with respect to obligations denominated in certain hyperinflationary currencies,

**§ 989(c)(4)** providing for alternative adjustments to the application of section 905(c),

**§ 989(c)(5)** providing for the appropriate treatment of related party transactions (including transactions between qualified business units of the same taxpayer), and

**§ 989(c)(6)** setting forth procedures for determining the average exchange rate for any period.

## Regulations

- [Treas. Reg. § 1.989(a)-1](/26/reg/1.989(a)-1.md): Definition of a qualified business unit. (interprets § 989(a))
- [Treas. Reg. § 1.989(b)-1](/26/reg/1.989(b)-1.md): Definition of weighted average exchange rate. (interprets § 989(b))

## Final rules

- [89 FR 100138](https://www.federalregister.gov/documents/2024/12/11/2024-28372/taxable-income-or-loss-and-currency-gain-or-loss-with-respect-to-a-qualified-business-unit) (2024): Taxable Income or Loss and Currency Gain or Loss With Respect to a Qualified Business Unit
- [81 FR 88806](https://www.federalregister.gov/documents/2016/12/08/2016-28381/income-and-currency-gain-or-loss-with-respect-to-a-section-987-qbu) (2016): Income and Currency Gain or Loss With Respect to a Section 987 QBU
- [74 FR 27868](https://www.federalregister.gov/documents/2009/06/11/E9-13521/application-of-separate-limitations-to-dividends-from-noncontrolled-section-902-corporations) (2009): Application of Separate Limitations to Dividends From Noncontrolled Section 902 Corporations

## Connections

Cites: § 905 Applicable rules; § 951 Amounts included in gross income of United States shareholders; § 1248 Gain from certain sales or exchanges of stock in certain foreign corporations

Cited by: § 856 Definition of real estate investment trust; § 904 Limitation on credit; § 953 Insurance income; § 954 Foreign base company income; § 7701 Definitions

## Amendments

- 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2590
- 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3529
- 1993-08-10: [Pub. L. 103-66](/26/act/103-66.md), 107 Stat. 499
- 1996-08-20: [Pub. L. 104-188](/26/act/104-188.md), 110 Stat. 1826
- 1997-08-05: [Pub. L. 105-34](/26/act/105-34.md), 111 Stat. 966
- 2004-10-22: [Pub. L. 108-357](/26/act/108-357.md), 118 Stat. 1508