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IRS Reaffirms Stance on Foreign-Currency Options Treatment (1)

July 5, 2022, 12:56 PMUpdated: July 5, 2022, 3:16 PM

Foreign-currency options shouldn’t be considered foreign-currency contracts for tax purposes, the IRS said Tuesday, in an attempt to resolve long-running uncertainty that could have enabled taxpayers to “choose their own outcome.”

The IRS’s proposed rule (REG-130675-17; RIN 1545-BO06) issued Tuesday reaffirms its previous stance on the issue, in the face of a 2016 federal appeals court ruling that had overruled the agency and left the matter in limbo.

While foreign-currency forward contracts should be considered contracts, foreign-currency options shouldn’t be, the IRS said in the proposed rule. It would be “inconsistent” with the law ...