§ 985 — Functional Currency

(a) Unless otherwise provided in regulations, all determinations under this subtitle shall be made in the taxpayer’s functional currency. (1) For purposes of this subtitle, the term “functional currency” means— (A) except as provided in subparagraph (B), the dollar, or (B) in the case of a qualified business unit, the currency of the economic environment in which a significant part of such unit’s activities are conducted and which is used by such unit in keeping its books and records. (2) The functional currency of any qualified business unit shall be the dollar if activities of such unit are primarily conducted in dollars. (3) To the extent provided in regulations, the taxpayer may elect to use the dollar as the functional currency for any qualified business unit if— (A) such unit keeps its books and records in dollars, or (B) the taxpayer uses a method of accounting that approximates a separate transactions method. (4) Any change in the functional currency shall be treated as a change in the taxpayer’s method of accounting for purposes of section 481 under procedures to be established by the Secretary.