988 transaction

From Wikipedia, the free encyclopedia
Jump to navigation Jump to search

A 988 transaction is a transaction described in section 988(c)(1) of the Internal Revenue Code[1] in the United States of America. This transaction occurs when a taxpayer enters into or acquires any debt instrument, forward contract, futures contract, option, or similar financial instrument held in a non-functional currency.[1] The rules for 988 transactions do not apply to any regulated futures contract or non-equity options which would be marked to market under 26 USCA § 1256[2] (1256 contract) if held on the last day of the taxable year.[1]


The provisions covering 988 transactions were enacted as part of the Tax Reform Act of 1986.[3][4]


The foreign currency gain or loss on a 988 transaction is treated as ordinary income or loss unless an election is made to treat it as a capital gain or loss.[1]

See also[edit]


  1. ^ a b c d 26 USCA section 988
  2. ^ 26 USCA § 1256
  3. ^ NY CPA Journal
  4. ^ See section 1261(a) of the Tax Reform Act of 1986, Pub. L. No. 99-514 (Oct. 22, 1986).

External links[edit]