Can the discharge of a mortgage on the disposal of a foreign rental property in a foreign currency (non-functional currency for a US tax resident) result in a foreign exchange gain or loss under IRC Section 988 in addition to a capital gain or loss on that property? If so, how is that gain or loss calculated?
Assuming the answer to the above question is positive, do the same rules apply to the annual mortgage payments in respect to foreign owned real estate where those payments are made in foreign currency?