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Foreign currency conversion at a gain

Technical topics regarding tax preparation.
#1
ode923  
Posts:
73
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26-Sep-2017 11:06am
Location:
USA
Client put cash into a foreign bank account in year 1.

It's year 5, and client wants to withdraw most of the cash, knowing it has increased in USD value.

I've been researching the taxability of this. Am I correct on this:

1) It's an ordinary gain or loss.
2) You calculate the gain or loss by taking the difference between the USD value on the date the money returned to the US in year 5, and the USD values based on the date the money was converted into the foreign currency in Year 1?
3) It gets reported as "Other Income" on the 1040.
 

#2
Posts:
71
Joined:
10-Jun-2019 4:20pm
Location:
WESTERN USA
I've been researching the taxability of this. Am I correct on this:

1) It's an ordinary gain or loss.
2) You calculate the gain or loss by taking the difference between the USD value on the date the money returned to the US in year 5, and the USD values based on the date the money was converted into the foreign currency in Year 1?
3) It gets reported as "Other Income" on the 1040
.


No, see Pub 525

Foreign currency transactions. If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you don't have to include that gain in your income unless it's more than $200. If the gain is more than $200, report it as a capital gain.
 

#3
ode923  
Posts:
73
Joined:
26-Sep-2017 11:06am
Location:
USA
Thanks for the response. In this case, we're talking about a "gain" well in excess of $200. Is your answer still no? Thanks again.
 


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