# Prop. Treas. Reg. § 1.987-1: Scope, definitions, and special 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. 3. Section 1.987-1 is amended by: 1. In paragraph (a): a. In the first sentence, removing the language “1.987-15” and adding the language “1.987-17” in its place; b. Revising the current last sentence of the paragraph and adding two sentences to the end of the paragraph; 2. In paragraph (g): a. Adding paragraphs (g)(2)(iv) and (v); b. Revising the first sentence of paragraph (g)(3)(ii)(A); and c. Adding paragraph (g)(3)(ii)(D). 3. In paragraph (h), adding definitions for “CFC exemption election”, “Domestic acquiring corporation,” “Exempt CFC”, “Exempt partnership”, “Exempt partnership QBU”, “Inbound nonrecognition transaction”, “Pre-election section 987 gain or loss”, “Pre-transaction period”, “Pre-transaction taxable year,” and “transferor CFC” in alphabetical order. The revisions and additions read as follows:

(a) * * * Section 1.987-15 provides rules relating to the CFC exemption election. Section 1.987-16 provides rules that apply to an inbound liquidation or reorganization of a CFC that was subject to the CFC exemption election. Section 1.987-17 provides the applicability date of the section 987 regulations.

* * * * *

(g) * * *

(2) * * *

(iv) Commissioner consent. An election is not deemed to be made or revoked under this paragraph (g)(2) or § 1.987-15(c) if the authorized person requests and receives consent from the Commissioner (as described in paragraph (g)(3)(ii)(A) of this section) to not make or to not revoke the election, as applicable.

(v) CFC exemption election. See § 1.987-15(c) for additional rules that apply with respect to the CFC exemption election.

(3) * * *

(ii) * * *

(A) * * * Except as provided in paragraph (g)(3)(ii)(B), (C), or (D) of this section, a section 987 election may not be made or revoked without the consent of the Commissioner. * * *

* * * * *

(D) CFC exemption election —( 1 ) Taxable years beginning after December 31, 2024 and ending on or before December 31, 2026. For a taxable year beginning after December 31, 2024, and ending on or before December 31, 2026, the authorized person may make a CFC exemption election without the Commissioner's consent by attaching the election statement described in paragraph (g)(3)(i) of this section to its original, timely filed (including extensions) return for such taxable year, in accordance with the prescribed form or its instructions (or other guidance). In addition, for a taxable year beginning in 2025, the authorized person may make a CFC exemption election without the Commissioner's consent by attaching the election statement described in paragraph (g)(3)(i) of this section to an amended return for such taxable year filed on or before October 15, 2027, in accordance with the prescribed form or its instructions (or other guidance).

( 2 ) Taxable years ending in 2027. For a taxable year ending in 2027 (other than a taxable year to which paragraph (g)(3)(ii)(D)( 4 ) of this section applies), the authorized person may make a CFC exemption election without the Commissioner's consent by filing the statement described in paragraph (g)(3)(i) of this section with the Internal Revenue Service in accordance with the prescribed form or its instructions (or other guidance) on or before October 15, 2027, and attaching a copy of the statement to its return for such taxable year.

( 3 ) Taxable years ending after December 31, 2027. For a taxable year ending after December 31, 2027 (other than a taxable year to which paragraph (g)(3)(ii)(D)( 4 ) of this section applies), the authorized person may make a CFC exemption election without the Commissioner's consent by filing the statement described in paragraph (g)(3)(i) of this section with the Internal Revenue Service in accordance with the prescribed form or its instructions (or other guidance) on or before the first day of the taxable year to which the election applies, and attaching a copy of the statement to its return for such taxable year.

( 4 ) Taxable year in which election first becomes relevant. For the taxable year in which the CFC exemption election first becomes relevant, the authorized person may make a CFC exemption election without the Commissioner's consent by attaching the election statement described in paragraph (g)(3)(i) of this section to its original, timely filed (including extensions) return for such taxable year, in accordance with the prescribed form or its instructions (or other guidance). For this purpose, the CFC exemption election first becomes relevant with respect to an authorized person in the first taxable year of the authorized person beginning after December 31, 2024, in which a CFC that is the owner of a section 987 QBU is part of the authorized person's section 987 electing group.

* * * * *

(h) * * *

* * * * *

CFC exemption election. CFC exemption election has the meaning provided in § 1.987-15(a).

* * * * *

Domestic acquiring corporation. Domestic acquiring corporation has the meaning provided in § 1.987-16(b).

* * * * *

Exempt CFC. Exempt CFC has the meaning provided in § 1.987-15(a).

Exempt partnership. Exempt partnership has the meaning provided in § 1.987-7(b)(2)(iv).

Exempt partnership QBU. Exempt partnership QBU has the meaning provided in § 1.987-7(b)(2)(iii).

* * * * *

Inbound nonrecognition transaction. Inbound nonrecognition transaction has the meaning provided in § 1.987-16(b).

* * * * *

Pre-election section 987 gain or loss. Pre-election section 987 gain or loss has the meaning provided in § 1.987-15(e)(2).

Pre-transaction period. Pre-transaction period has the meaning provided in § 1.987-16(b)(2).

Pre-transaction taxable year. Pre-transaction taxable year has the meaning provided in § 1.987-16(c)(2)(ii).

* * * * *

Transferor CFC. Transferor CFC has the meaning provided in § 1.987-16(b).

* * * * *