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What does 988 TRANSACTION mean? 988 TRANSACTION meaning - 988 TRANSACTION definition - 988 TRANSACTION explanation. What is the meaning of 988 TRANSACTION? What is the definition of 988 TRANSACTION? What does 988 TRANSACTION stand for? What is 988 TRANSACTION meaning? What is 988 TRANSACTION definition?

Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license.

A 988 transaction is a transaction described in section 988(c)(1) of the Internal Revenue Code in the United States of America. This transaction occurs when a taxpayer enters into or acquires any debt instrument, forward contract, futures contract, option, or similar financial instrument held in a non-functional currency. The rules for 988 transactions do not apply to any regulated futures contract or non-equity options which would be marked to market under 26 USCA § 1256 (1256 contract) if held on the last day of the taxable year.

The provisions covering 988 transactions were enacted as part of the Tax Reform Act of 1986.

The foreign currency gain or loss on a 988 transaction is treated as ordinary income or loss unless an election is made to treat it as a capital gain or loss.