Proposed section 988 regulations.

On October 8, 1992, Tax Executives Institute filed the following comments with the Internal Revenue Service on proposed regulations under section 988 of the Code, relating to the taxation of gain or loss from certain nonfunctional currency transactions. The Institute's comments were prepared under the aegis of its International Tax Committee, whose chair is Lisa Norton of the Ingersoll-Rand Company. Contributing materially to the development of the Institute's position was Joseph E. Bernot of NCR Corporation.

On March 17, 1992, the Internal Revenue Service issued proposed regulations under section 988 of the Internal Revenue Code, relating to the taxation of gain or loss from certain nonfunctional currency transactions. The regulations were published in the Federal Register on March 17, 1992 (57 Fed. Reg. 9217), and in the April 13, 1992, issue of the Internal Revenue Bulletin (1992-15 I.R.B. 47).

For simplicity's sake, the proposed regulations are referred to as the "proposed regulations." Specific provisions are cited as "Prop. Reg. [section]." References to page numbers are to the proposed regulations (and preamble) as published in the Internal Revenue Bulletin.

Background

Tax Executives Institute is the principal association of corporate tax executives in North America. Our 4,700 members represent more than 2,000 of the leading corporations in the United States and Canada. TEI represents a cross-section of the business community, and is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works -- one that is administrable and with which taxpayers can comply.

Members of TEI are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises. We believe that the diversity and professional training of our members enable us to bring an important, balanced, and practical perspective to the issues raised by the proposed regulations under section 988 of the Code, relating to the taxation of gain or loss from certain nonfunctional currency transactions.

Overall, we believe the proposed regulations are well thought out and effectively implement the statutory purpose. The new mark-to-market election will provide symmetry for financial and tax accounting purposes, thereby significantly...