Читать книгу International Taxation - Adnan Islam - Страница 78

In general, foreign currency gain or loss attributable to a Section 988 transaction that is treated as ordinary income will have its source determined by reference to the residence of the taxpayer or the QBU of the taxpayer on whose books the asset, liability, or item of income or expense is properly reflected. An individual’s residence is the country in which the person’s tax home is located. The residence of a U.S. corporation, partnership, estate, or trust is the United States. The residence of a foreign corporation, partnership, estate, or trust is considered not to be in the United States. In the case of a QBU, the residence of each unit is the country in which it is located. The residency of a partner in a partnership not engaged in a U.S. trade or business is determined at the partner level.

There is a special sourcing rule for loans made by a U.S. person or a related person, to a 10%-owned foreign corporation, when the loan is denominated in a currency other than the dollar and bears an interest rate at least 10 percentage points higher than the federal midterm rate at the time the loan is made. In this case, for purposes of Section 904 only, the affected loans are marked to market on an annual basis and interest income earned on the loan during the year is treated as domestic source income to the extent of any loss on the loan.

Any gain or loss realized on a Section 988 transaction that is treated as interest income or expense must be sourced or allocated and apportioned between U.S. and foreign-source income and expense. The allocation and apportionment of exchange gain or loss does not affect the source of exchange gain or loss.