- 21 -
relationship of deductions to gross income", is to deal with each
item individually. Sec. 1.861-8(a)(2), Income Tax Regs. Because
petitioner agrees with respondent that the "accrual of income
tax" and "other" items are properly allocated against all income,
we need only discuss the proper treatment of the "accrual of
interest payments" and "accrual of swap payments" items.
Respondent argues for the application of section 1.861-
8(e)(7), Income Tax Regs., which provides that loss from the
sale, exchange, or disposition of property be allocated to "the
class of gross income to which such asset or property ordinarily
gives rise in the hands of the taxpayer." Respondent further
argues that the facts of this case represent "unusual
circumstances" and that apportionment by gross income is
necessary. Sec. 1.861-8(e)(7)(ii), Income Tax Regs. Respondent
contends that foreign currency is "property" for purposes of the
Code, and that the losses at issue resulted from the exchange of
this property.
We are not convinced. The cases cited by respondent do not
support the application of section 1.861-8(e)(7), Income Tax
Regs., to the facts of this case. It is true that this Court has
held that foreign currency is property. Federal National
Mortgage Association v. Commissioner, 100 T.C. 541, 582 (1993);
National-Standard Co. v. Commissioner, 80 T.C. 551 (1983), affd.
749 F.2d 369 (6th Cir. 1984). Nevertheless, this Court has also
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011