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You must specify a value for the Bifurcation Method field (tag 5825) at the entity/accounting basis level. You can select a value of No, All, or Section 988.

The IRS U.S. Revenue Code, Title 26, Section 988 regulation requires taxable entities that are subject to the US Revenue Code (generally, US mutual funds) to determine whether a portion of gains and losses realized upon the disposition of debt instruments should be allocated to currency gain/loss, investment gain/loss, or both. As currency gain/loss is considered income, and investment gain/loss is considered a capital gain/loss, this allocation impacts the amount of income and capital gains distributable to shareholders of a fund.

If you set the Bifurcation Method to:

  • All for domestic (base currency) securities, Eagle Accounting calculates capital realized gains/losses, and automatically updates the capital realized gain/loss general ledger accounts.
  • All for foreign (non-base currency) securities, Eagle Accounting calculates capital and currency realized gains/losses. Capital realized gains/losses automatically updates the capital realized gain/loss general ledger accounts; currency realized gains/losses automatically update the currency realized gain/loss general ledger accounts.
  • No for domestic (base currency) securities, Eagle Accounting calculates capital realized gains/losses, and automatically updates the capital realized gain/loss general ledger accounts.
  • No for foreign (non-base currency) securities, Eagle Accounting calculates capital and currency realized gains/losses, and automatically updates the capital realized gain/loss general ledger accounts only. Currency realized gain/loss general ledger accounts are not updated.
  • Section 988. Eagle Accounting determines whether the Processing Security Type of the security is eligible for Section 988 processing, based upon processing security types established in the 988 BIFURCATION code category.
    • If the security is eligible and is a foreign (non-base currency) security, Eagle Accounting calculates capital and currency realized gains/losses. Eagle Accounting evaluates the currency gain/loss to determine how to post the bifurcated realized gains/losses, which are based on the Section 988 decision tree.
    • If the security is ineligible and is a foreign (non-base currency) security, Eagle Accounting calculates capital and currency realized gains/losses. Eagle Accounting automatically updates general ledger accounts according to Bifurcation Method No processing.
    • If the security is a domestic (base currency) security, Eagle Accounting calculates capital realized gain/loss, and automatically updates the capital realized gain/loss general ledger accounts.

The following figure describes how Eagle Accounting uses the Section 988 option during processing.

The system caches 988 Bifurcation codes values when the Eagle STAR engine is started. Therefore, any additions or deletion to the values in the 988 BIFURCATION code category require you to stop and start the Eagle STAR engine, so the system caches new values in memory. Eagle Accounting supplies a set of default 988 Bifurcation Codes as part of the installation/upgrade process, but you can modify the 988 Bifurcation codes, or add new 988 Bifurcation codes, as they apply to your business.


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