Internal Revenue Code · 26 U.S.C.
§ 985. Functional currency
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 985
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- October 22, 1986 by Pub. L. 99–514
- Length
- 2 subsections · 248 words · about 1 min to read
- Defines
- 1 term
- Cross-references
- cites 1; cited by 1 Code section and 13 other regulations
- Regulations
- 9 issued under this section
Unless otherwise provided in regulations, all determinations under this subtitle shall be made in the taxpayer’s functional currency.
The functional currency of any qualified business unit shall be the dollar if activities of such unit are primarily conducted in dollars.
Any change in the functional currency shall be treated as a change in the taxpayer’s method of accounting for purposes of section 481 under procedures to be established by the Secretary.
(Added Pub. L. 99–514, title XII, § 1261(a), Oct. 22, 1986, 100 Stat. 2585.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 985
- § 1.985-0 Outline of regulation.
- § 1.985-1 Functional currency.
- § 1.985-2 Election to use the United States dollar as the functional currency of a QBU.
- § 1.985-3 United States dollar approximate separate transactions method.
- § 1.985-4 Method of accounting.
- § 1.985-5 Adjustments required upon change in functional currency.
- § 1.985-6 Transition rules for a QBU that uses the dollar approximate separate transactions method for its first taxable year beginning in 1987.
- § 1.985-7 Adjustments required in connection with a change to DASTM.
- § 1.985-8 Special rules applicable to the European Monetary Union (conversion to euro).
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 1 other section
Cited by 1 Code section
Cited in 13 regulations not issued under it
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.367(b)-0 Table of contents.
- § 1.367(b)-2 Definitions and special rules.
- § 1.960-1 Overview, definitions, and computational rules for determining foreign income taxes deemed paid under section 960(a), (b), and (d).
- § 1.964-1 Determination of the earnings and profits of a foreign corporation.
- § 1.986(a)-1 Translation of foreign income taxes for purposes of the foreign tax credit.
- § 1.987-2 Attribution of items to eligible QBUs; definition of a transfer and related rules.
- § 1.988-1 Certain definitions and special rules.
- § 1.988-4 Source of gain or loss realized on a section 988 transaction.
- § 1.1502-80 Applicability of other provisions of law.
- § 4.954-1 Foreign base company income; taxable years beginning after December 31, 1986.
- § 4.954-2 Foreign personal holding company income; taxable years beginning after December 31, 1986.
- § 58.4501-7 Special rules for acquisitions or repurchases of stock of certain foreign corporations.
Amendment history
From the source credit and the official notes, newest first.
- Added by Pub. L. 99–514
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter N Tax Based on Income From Sources Within or Without the United States
- Part III INCOME FROM SOURCES WITHOUT THE UNITED STATES
- Subpart J Foreign Currency Transactions
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Statutory Notes and Related Subsidiaries
Effective Date
Pub. L. 99–514, title XII, § 1261(e), Oct. 22, 1986, 100 Stat. 2591, provided that:
“(1) In general.— Except as provided in paragraph (2), the amendments made by this section [enacting this subpart and amending sections 1092 and 1256 of this title] shall apply to taxable years beginning after December 31, 1986.“(2) Special rules for purposes of sections 902 and 960.— For purposes of applying sections [former] 902 and 960 of the Internal Revenue Code of 1986, the amendments made by this section shall apply to—“(A) earnings and profits of the foreign corporation for taxable years beginning after December 31, 1986, and“(B) foreign taxes paid or accrued by the foreign corporation with respect to such earnings and profits.”