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Cross-border Tax Talks
September 10, 2026
Measure Twice, Elect Once: The Latest Section 987 Regs
Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Laura Valestin, an international tax partner in PwC’s Washington National Tax Services office, who specializes in the taxation of financial transactions, including foreign currency. Doug and Laura discuss the proposed Section 987 regulations governing the new CFC election, beginning with the rule’s scope, history, and common QBU fact patterns. They explain how the election can turn off future Section 987 gain-or-loss computations, while preserving translation and basis-tracking requirements, and examine consistency across commonly controlled CFCs, partnership applications, inbound transactions, and the loss of future Section 987 losses. They also cover the 120-month amortization of pre-election amounts, the $50 million asset threshold, election timing and filing mechanics, reliance on the proposed rules, the November 12 comment deadline, and why detailed modeling is essential before making an effectively irrevocable choice.
- [01:05] Summer travel reflections from Costa Rica, Belize, Croatia, and St. Louis.
- [03:00] What is Section 987, and which QBU fact patterns trigger it?
- [05:50] How Section 987 evolved from the 1986 statute through the 2026 framework.
- [09:10] Operative rules: what the new CFC election turns off, and what remains required.
- [11:00] Why commonly controlled CFCs must apply the election consistently.
- [13:10] Compliance relief versus forfeited future losses and limited revocability.
- [15:10] Consequences of inbound liquidations, check-the-box transactions, and reorganizations.
- [16:30] Two inbound gain methods: a 72-month lookback or excess asset basis.
- [19:00] Amortizing pre-election gains and losses over 120 months.
- [20:15] The $50 million US GAAP asset threshold and QBU aggregation.
- [21:30] Choosing 2025 or 2026 to preserve losses and manage return impacts.
- [24:40] How the election applies to partnerships, exempt partnerships, and domestic partners.
- [27:05] Sourcing amortized Section 987 amounts using preceding-year assets.
- [28:00] Reliance on the proposed regulations beginning in 2025; comments matter, and they are due November 12.
- [29:05] Election filing, revocation, Form 8964 ELE, and applicable deadlines.
- [31:00] Next steps: modeling gains, losses, foreign tax credits, and long-term effects.
Speakers
International Tax Services Global Leader, PwC US
Laura Valestin
Partner, International Tax Services, PwC US
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