Branch transactions.

In Notice 2000-20,Treasury and the IRS requested comments by June 19, 2000 on certain issues to be addressed in revised Sec. 987 regulations on foreign currency transactions.To date, the revised regulations have not yet been issued.

In this regard, the AICPA offered comments on qualified business units (QBUs) that are branches, including disregarded entities. (It did not address the Sec. 987 consequences of partnerships, estates or trusts.)

It suggested that the revised regulations (1) provide that no exchange gain or loss be recognized on remittances of capital from a QBU and (2) adopt Regs. Sec. 1.987-5's four-pool approach to determine whether transfers are remittances of earnings or capital.The AICPA also proposed that the revised regulation adopt an annual netting rule and respect the legal form of ownership of QBUs in determining the Sec. 987 consequences of any property transfer between QBUs.

Further, it remarked that the revised regulations should provide that transfers between two QBUs with the same functional currency do not result in Sec. 987 exchange gain or loss, regardless of how the QBUs are owned. Moreover, the revised rules should not distinguish between the types of property distributed from a QBU.

The AICPA made other comments; the text of its letter is available at www.cpa2biz.com/ResourceCenters/ Tax/International1/987regs.htm.