How to Fill Out and File Form 8964: Section 987 ELE and TRA Forms

To file Form 8964 for Section 987 foreign currency reporting, you attach one or both of its two variants to your income tax return: Form 8964-ELE when you are making or revoking a Section 987 election, and Form 8964-TRA when you are reporting the one-time transition to the 2024 final regulations for a qualified business unit you already owned. Both are attachments to your primary return, both are due by that return’s due date including extensions, and Form 8964-TRA requires a separate form for each applicable QBU.¹²

Which Form 8964 You Need

Form 8964 is not a single form. It is a pair of forms that arrived with the 2024 final regulations under Section 987, and they do different jobs.

Form 8964-ELE handles elections. If you are making, or revoking, any of the elections available under the Section 987 regulations, this is the form. It satisfies the reporting requirement of Regulation Section 1.987-1(g).¹ It is filed only for the year you make or revoke an election. If your elections carry forward unchanged, you do not file Form 8964-ELE that year.

Form 8964-TRA handles the one-time transition. If you owned a Section 987 QBU on the transition date — generally the first tax year beginning after December 31, 2024 — you file Form 8964-TRA to report the switch from your prior method of computing Section 987 gain or loss to the method required by the final regulations.² Partnerships and S corporations are not required to file Form 8964-TRA. Owners of terminating QBUs must still file it in the first tax year beginning after December 31, 2024.

Many filers preparing 2026 returns for calendar-year 2025 will file both: Form 8964-TRA once to record the transition, and Form 8964-ELE alongside it if any elections are being made that year.

Who Files Form 8964 in the First Place

The underlying obligation attaches to any U.S. person that owns or operates a qualified business unit whose functional currency differs from the taxpayer’s own. A QBU is a separate, clearly identified unit of a trade or business that maintains its own books and records.³ In practice, that usually means a foreign branch or foreign disregarded entity that keeps its books in a local currency like the euro, yen, or pound.

There is no dollar threshold. If you have a QBU whose functional currency differs from yours, the Section 987 regime applies regardless of the QBU’s size, and the Form 8964 filings follow the same reach.

One boundary worth stating: Form 8964 does not replace Form 8858. Form 8858 is the annual information return for the QBU itself, and it remains a separate filing with its own instructions and its own penalty regime. Form 8964-ELE and Form 8964-TRA sit alongside Form 8858, not in place of it.

What to Gather Before You Start

Both variants of Form 8964 assume you already have the QBU’s underlying financial data organized. For each QBU, pull together:

The trial balance and income statement in the QBU’s functional currency for the tax year.
Opening and closing balance sheets showing the adjusted basis of every asset and the amount of every liability, in functional currency.
A record of every remittance from the QBU to its owner during the year — cash, property, or other value.
The specific exchange rates used to translate each category of income and each balance sheet item into U.S. dollars.
Any prior Section 987 election statements you have filed, and documentation of the method you previously used to compute Section 987 gain or loss.

The IRS accepts exchange rates from banks, U.S. embassies, the Treasury Department, the Federal Reserve, oanda.com, and xe.com, and advises taxpayers to use the rate that most properly reflects income.⁴ Use one source consistently across all QBUs and periods.

Filling Out Form 8964-ELE

Form 8964-ELE is used to make or revoke Section 987 elections. Identify the filer, identify the QBU or group of QBUs the election covers, and indicate which election is being made or revoked. The instructions to Form 8964-ELE list the elections available under the 2024 final regulations, and each has its own effect on how the QBU’s currency gain or loss is computed.¹

The two elections that come up most often:

Current rate election. Treats all of the QBU’s assets and liabilities as marked items, translated at the current exchange rate rather than at historic rates. It simplifies the calculation considerably, but it triggers the loss suspension rules that defer recognition of currency losses on remittance.⁵
Annual recognition election. Recognizes all net unrecognized Section 987 gain or loss each year, whether or not a remittance occurred. You lose the deferral, but you no longer need to track remittance proportions.

The instructions also cover a Section 988 mark-to-market election, a grouping election to treat all same-currency QBUs of a single owner as one QBU, an election to use a spot rate convention, an election to use the historic inventory method, and several transition-specific elections tied to Form 8964-TRA.¹

Before you sign, understand the lockout. Once made, a current rate election, an annual recognition election, or a Section 988 mark-to-market election cannot be revoked without IRS consent for any tax year beginning within 60 months of the year it was made. The same 60-month window applies after a revocation, blocking a re-election within that period absent consent.⁵ Model the five-year outcome before you file.

Form 8964-ELE is attached to your timely-filed return (including extensions) for the first year to which the election applies. If you are making multiple elections that take effect the same year, they can generally be reported on the same Form 8964-ELE filing for that year.

Filling Out Form 8964-TRA

Form 8964-TRA is the transition report. You file one for each Section 987 QBU you owned on the transition date. On each form you identify the QBU, describe the method you previously used to compute Section 987 gain or loss, state whether that method qualifies as an “eligible pretransition method” under Regulation Section 1.987-10(e)(4), and compute your pretransition gain or loss for the QBU.²

If you previously used the 1991 proposed regulations or another recognized method, your historic equity and basis pools do not simply roll into opening balances under the new regime. The opening balance for purposes of the final regulations is determined by the QBU’s tax basis net value at the relevant date, and any accumulated gain or loss under the old method has to be accounted for as pretransition gain or loss on Form 8964-TRA.

Two transition-specific elections change how that pretransition figure hits your return, and both are made on Form 8964-ELE filed alongside Form 8964-TRA:¹

Amortization election. Recognize pretransition gain or loss ratably over ten years rather than all at once.
Small business election. Treat pretransition gain or loss as zero. Available only to qualifying small businesses.

File a separate Form 8964-TRA for each QBU. Do not combine QBUs on one form even if they share a functional currency, unless a grouping election has been made and covers them.

How and When to File

Both forms are attachments. Neither is filed as a standalone document. Attach them to the same primary return that carries your Form 8858 filing — typically Form 1120, Form 1065, Form 5471, Form 8865, Form 1040, Form 1040-SR, or Form 1041, depending on the filer.⁶

The due date matches the primary return, including extensions. For calendar-year individuals, that is April 15, with a six-month extension available. For calendar-year corporations, it is the 15th day of the fourth month after the close of the tax year, also with a six-month extension available. If you extend the primary return, the Form 8964 filings ride along on the extended due date.

Electronic filing runs through the IRS Modernized e-File (MeF) system for corporate and partnership returns. If Form 1120 or Form 1065 is filed electronically, the attached international information return package is transmitted electronically as well. Individual filers submitting Form 1040 electronically attach Form 8858 to Form 8453, and the Form 8964 filings travel with it.⁶⁷ Paper filers send the return with all Section 987 forms attached to the service center designated for their return type and location. If you are filing close to the deadline on paper, use certified mail with return receipt.

One point that trips filers: the transition filing has a hard year attached to it. Form 8964-TRA is due with the return for the first tax year beginning after December 31, 2024. For a calendar-year taxpayer, that is the 2025 return, filed in 2026. If you miss the transition year, you cannot simply file it later without addressing the compliance gap for the prior period.

Penalties and the Open Statute

Form 8964 does not carry its own free-standing penalty schedule in the file, but it lives inside the Section 987 compliance package built around Form 8858. The penalty for failing to file a complete and correct Form 8858 by the due date is $10,000 per QBU, per annual accounting period.⁸ If the failure continues more than 90 days after the IRS mails a notice, an additional $10,000 accrues for each 30-day period or fraction thereof, capped at $50,000 per failure. Maximum exposure reaches $60,000 per QBU per year.

The bigger consequence is the statute of limitations. Under 26 U.S.C. § 6501(c)(8), the IRS’s window to assess additional tax on any return to which the missing international information relates does not close until three years after the information is finally furnished.⁹ An incomplete Section 987 filing package can hold the entire return open, not just the currency items.

Recordkeeping After You File

Once Form 8964 has been filed, the recordkeeping obligation continues. Under Regulation Section 1.987-9, owners must maintain, for each QBU and every tax year, all items of income, gain, deduction, or loss attributed to the QBU (in both functional currency and the owner’s functional currency); the QBU’s adjusted balance sheet in both currencies; the exchange rates used for each translation; and a copy of every Section 987 election statement filed, for as long as the election remains in effect.¹⁰

The election-statement retention rule matters specifically for Form 8964-ELE. If you made a current rate election in 2025, you keep that filed Form 8964-ELE in your records for as long as the election is in force — which, given the 60-month lockout on revocation, is at minimum five years, and in practice indefinitely for most filers. Because an unfiled or incomplete Form 8858 keeps the statute of limitations open, there is a strong practical case for retaining the entire Section 987 file — Form 8858, Schedule M, Form 8964-ELE, Form 8964-TRA, and supporting workpapers — until every year has been closed by examination or by expiration of the assessment window.

1
Internal Revenue Service. Instructions for Form 8964-ELE (Rev. December 2025)
2
Internal Revenue Service. Instructions for Form 8964-TRA (December 2025)
3
Office of the Law Revision Counsel. 26 U.S. Code 989 – Other Definitions and Special Rules
4
Internal Revenue Service. Foreign Currency and Currency Exchange Rates
5
eCFR. 26 CFR 1.987-1 – Scope, Definitions, and Special Rules
6
Internal Revenue Service. Instructions for Form 8858 (12/2024)
7
Internal Revenue Service. Modernized e-File (MeF) Overview
8
Office of the Law Revision Counsel. 26 USC 6038
9
Office of the Law Revision Counsel. 26 U.S. Code 6501 – Limitations on Assessment and Collection
10
eCFR. 26 CFR 1.987-9 – Recordkeeping Requirements