TREASURY REGULATIONS

(a) through (b)(15) [Reserved] For further guidance, see § 1.988-2(a) through (b)(15).

(16) Deferral of loss on certain related-party debt instruments—(i) Treatment of creditor. For rules applicable to a corporation included in a controlled group that is a creditor under a debt instrument see § 1.267(f)-1(e).

(ii) Treatment of debtor—(A) In general. Exchange loss realized under § 1.988-2(b)(4) or (b)(6) is deferred if—

(1) The loss is realized by a debtor with respect to a loan from a person that has a relationship to the debtor described in section 267(b) or section 707(b); and

(2) The transaction resulting in the realization of exchange loss has as a principal purpose the avoidance of Federal income tax.

(B) Recognition of deferred loss. Any exchange loss that is deferred under paragraph (b)(16)(ii)(A) of this section is deferred until the end of the term of the loan, determined immediately prior to the transaction.

(17) through (h) [Reserved] For further guidance, see § 1.988-2(b)(17) through (h).

(i) Special rules for section 988 transactions of a section 987 QBU. For rules regarding section 988 transactions of a section 987 QBU, see § 1.987-3T(b)(4) for section 987 QBUs in general and § 1.987-1T(b)(6) for dollar QBUs.

(j) Effective/applicability date. Paragraph (b)(16) of this section applies to any exchange loss realized on or after December 7, 2016. Paragraph (i) of this section applies to taxable years beginning on or after one year after the first day of the first taxable year following December 7, 2016. Notwithstanding the preceding sentence, if a taxpayer makes an election under § 1.987-11(b), then paragraph (i) of this section applies to taxable years to which §§ 1.987-1 through 1.987-10 apply as a result of such election.

(k) Expiration date. The applicability of this section expires on December 6, 2019.