October 10, 1989
TO: TAX MEMBERS NO. 38-89
CLOSED-END FUND MEMBERS NO. 52-89
INTERNATIONAL FUNDS TASK FORCE NO. 16-89
ACCOUNTING/TREASURERS COMMITTEE NO. 44-89
RE: IRS PRIVATE LETTER RULING ON FUNCTIONAL CURRENCY
OTHER THAN THE U.S. DOLLAR
__________________________________________________________
In the attached private letter ruling released earlier this
year, the Internal Revenue Service addressed several tax
computation issues arising from the foreign currency rules of
Code sections 985 through 989. The regulated investment company
("RIC") involved in this ruling is a closed-end fund investing in
only one (foreign) country (a "single-country fund"). For
purposes of this ruling, the IRS assumed that this RIC has a
qualified business unit ("QBU") and that the foreign country's
currency is the QBU's functional currency.
Recently, final regulations were issued which affirmatively
answer the question of whether a RIC can have a QBU with a
functional currency other than the U.S. dollar (See Institute
Memorandum to Tax Members No. 37-89, Closed-End Fund Members No.
51-89, International Funds Task Force No. 15-89 and
Accounting/Treasurers Committee No. 43-89, dated October 9,
1989).
The single-country fund in this ruling requested and
received several rulings regarding how it and its QBU are to
compute their income for tax purposes and value their assets for
RIC qualification purposes.
We will keep you informed of developments.
Keith D. Lawson
Assistant General Counsel
Attachment