# Prop. Treas. Reg. § 1.987-10: Transition rules.

Proposed regulation, not in force. REG-103844-26, 91 FR 52553, published 2026-08-14 <https://www.federalregister.gov/documents/2026/08/14/2026-16569/foreign-currency-gain-or-loss-of-controlled-foreign-corporations>. Interprets 26 U.S.C. § 987.

Par. 6. Section 1.987-10 is amended by: 1. In paragraph (c)(1), removing the language “1.987-15(a)(1)” and adding the language “1.987-17(a)(1)” in its place; 2. Revising paragraph (e)(5)(ii)(A) and the last sentence of paragraph (e)(5)(ii)(C); and 3. Adding paragraph (e)(5)(ii)(D). The revisions and addition read as follows:

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(e) * * *

(5) * * *

(ii) * * *

(A) In general. A taxpayer may elect to recognize pretransition gain or loss ratably over the transition period. If an election is made to recognize pretransition gain or loss ratably over the transition period, then paragraph (e)(5)(i) of this section does not apply, and each owner to which the election applies recognizes its pretransition gain or loss with respect to each section 987 QBU, original deferral QBU, and outbound loss QBU ratably over a period of 120 months beginning with the first month of the taxable year that begins on the transition date described in paragraph (c)(1) of this section. See § 1.987-1(g) for rules relating to section 987 elections (including consistency rules).

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(C) * * * The pretransition gain or loss is recognized ratably over a period of 120 months beginning with the first month of the taxable year that begins on the transition date described in paragraph (c)(1) of this section.

(D) Amounts previously recognized under ten-year amortization rule. For purposes of this paragraph (e)(5)(ii), if an owner recognized a ratable portion of its pretransition gain or loss in one or more taxable years under § 1.987-10(e)(5)(ii)(A) or (C), as contained in 26 CFR in part 1 in effect on April 1, 2025, each such taxable year is deemed to contain twelve months. Thus, for example, if the first taxable year of an owner in which the section 987 regulations apply is a short taxable year lasting one month, and the owner recognized one tenth of its pretransition gain or loss in that taxable year under § 1.987-10(e)(5)(ii)(A) or (C), as contained in 26 CFR in part 1 in effect on April 1, 2025, the owner recognizes its remaining pretransition gain or loss ratably over 108 months beginning with the first month of the next taxable year.

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