IRS Practice Unit: Determination of Exchange Gain or Loss of Previously Taxed Earnings and Profits (IRC §986)

Foreign currency gain or loss on the distribution of previously taxed income (PTI) by a controlled foreign corporation (CFC) to the U.S. shareholder covered in an IRS Large Business and International Concept Unit released May 8. When the originating deemed distribution under, for example, tax code Section 951 is earned and maintained as PTI in the CFC’s functional currency, the distribution of PTI by the CFC must be translated to the U.S. dollar for U.S. federal income tax purposes at the spot rate on the date of actual distribution, the IRS gave as an example. The IRS also provided ...