here a link to section 988.
https://www.law.cornell.edu/uscode/text/26/988
an important part of 988 is subsection e
(e)Application to individuals
(1)In general
The preceding provisions of this section shall not apply to any section 988 transaction entered into by an individual which is a personal transaction.
(2)Exclusion for certain personal transactions If—
(A)nonfunctional currency is disposed of by an individual in any transaction, and
(B)such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by reason of changes in exchange rates after such currency was acquired by such individual and before such disposition. The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.
(3)Personal transactions
For purposes of this subsection, the term “personal transaction” means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of—
(A)section 162 (other than traveling expenses described in subsection (a)(2) thereof), or
(B)section 212 (other than that part of section 212 dealing with expenses incurred in connection with taxes).
sec 162 trade or business expenses
sec 212 expenses for the production of income
however, here's a link to reg 1.988-1
https://www.law.cornell.edu/cfr/text/26/1.988-1
take a look a 1.988-1(a)(6) examples 4, 8 and 9
4 and 8 are clearly stated as 988 transactions, 9 is not
988(e) would suggest that a personal transaction is one that is neither investment nor business related
for example you convert US $'s to pesos for a trip to Mexico. When you return you convert the remaining pesos back into US $ getting more or less than the original cost in US $'s - ie a personal transaction subject to 988(e). Section 988 transaction gains or losses are ordinary income reported on line 8 of Schedule 1. Section 988(a)(1)(A)
