Entering IRC Section 988 Gain or Loss Transaction in Lacerte

Where is the input for IRC Section 988 Gain/Loss?

Solution:

IRC Section 988 Gain or Loss can be entered in Screen 17, Dispositions.

The foreign currency gain or loss on a 988 transaction is treated as ordinary income or loss unless an election is made to treat it as a capital gain or loss.

Note:  This election is made by the taxpayer at the time of the transaction, so no election needs to be made on the tax return.

In order to treat this activity as Ordinary income:

1. Make sure to enter either short term dates, or 1 in the field 1 = short term, 2 = long term [O]
2. Scroll down to the Form 4797 section and enter a -1 in the Depreciation allowed (-1=none, triggers 4797) field
3. This will allow the total to show on Form 4797, Part II (Ordinary income/loss), which will then flow to line 14 on the Form 1040

If the transaction should be treated as a capital gain or loss:

1. Enter the Date Acquired, Date Sold, Sales Price, and Cost or Basis
2. The gain or loss will flow to Schedule D, Part I or Part II (depending on short term, or long term dates), which  will then flow to line 13 of the 1040.