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IRS Foreign Currency Transactions


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#1 m310e320

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Posted 28 March 2012 - 12:29 AM

The IRS has a rule conserning foreign transations."If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more han $200. If the gain is more than $200, report it as a capital gain." Does this mean when we cash in we pay the capital gain tax rate of 15%.
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#2 cgbrown

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Posted 28 March 2012 - 12:56 AM

Consult your tax lawyer, for a more definate answer. But my understanding is yes, we do.
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#3 caughtinthecrossfire

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Posted 28 March 2012 - 01:15 AM

I wish I could recall who posted great comments on this about a month ago but from what little I remember, there are minor if's and's or's but's whatfore's hithertoo's and so on and so on's to all of these statements from the IRS...provisions, if you will.

In a nutshell...if you hold a substantial amount of dinar and there is a RV that brings a substantial gain over this $200, you are best advised by cgbrown's comment to seek a professional but certainly a professional that specializes in this type of (hopefully) windfall.

Other than adding that the professional should specialize in this type of gain...I will repeat that some previous posts have suggested that there are many breakdowns in the quote you gave, m310e320, and a specialized atty will be much better to seek out.
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#4 detroitjazzman

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Posted 28 March 2012 - 02:44 AM

The IRS has a rule conserning foreign transations."If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more han $200. If the gain is more than $200, report it as a capital gain." Does this mean when we cash in we pay the capital gain tax rate of 15%.


Capital Gains taxes are predicated on previous years tax rate. read here; http://www.moneychim..._calculator.htm
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#5 Luigi1

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Posted 28 March 2012 - 04:01 AM

I just got back from my accountant after tax preparations. He said as of now, it's 15% long term gain of a year or more & 30% short term gain, less than a year.

You must have proof of when or the date your IQD was purchased. If not, it will be treated as a short term gain & taxed at a higher rate without any proof.

Claim everything older than a year. Don't lie. The the Currency Traders must file with the IRS of all their transactions. The IRS already knows how much we own. Cash in the rest after a year of purchase. Avoid any hastles, if at all possible.
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#6 Butifldrm

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Posted 28 March 2012 - 05:51 AM

I'm hoping we have up to a two year cash in window (which the CBI stated, the two currenies will hold value concurrently for two years). So the Dinar I purshased this year, I can hold until the long term Capital gains requirement id met! :D

I wish I could recall who posted great comments on this about a month ago but from what little I remember, there are minor if's and's or's but's whatfore's hithertoo's and so on and so on's to all of these statements from the IRS...provisions, if you will.


Read more: http://dinarvets.com.../#ixzz1qPZbOReK

Oh, by the way i think you are talking about EXECONSULTANT.
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#7 gakman

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Posted 28 March 2012 - 07:11 AM

Everyone has to talk to a good CPA or a good tax attorney. One warning- everyone look up IRS Section 988- this IRS section states that most gains from foreign currency transactions are taxed as ordinary income!! :o :angry: :angry:
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#8 crackerman58

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Posted 28 March 2012 - 07:59 AM

Found these on the IRS site, hope they are helpful.

Attached Files


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#9 one2one

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Posted 28 March 2012 - 01:30 PM

i.r.s. publication 525---page 33

http://dinarvets.com...on-525-page-33/
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#10 Rabbi

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Posted 28 March 2012 - 03:15 PM

Everyone has to talk to a good CPA or a good tax attorney. One warning- everyone look up IRS Section 988- this IRS section states that most gains from foreign currency transactions are taxed as ordinary income!! :o :angry: :angry:


I am a CPA who specializes in taxes. Section 988 applies to cash or financial instruments (for example, an A/R, A/P or other debt instrument stated in a foreign currency) obtained in the ordinary course of doing business overseas. Converting such cash and/or collecting on such and instrument normally results in "ordinary income" treatment. Section 988 applies to any further increase in value that accrues to such cash and/or instruments as a result of the change in the exchange rate between that currency and the dollar, and this Section also taints this additional increase in value with the same "ordinary income" tax treatment.

If you are NOT engaged in a foreign-related trade or business or you do NOT engage in foreign-related transactions on a regular basis, then Section 988 does NOT apply to you. Buying dinars on an isolated number of purchases from a domestically-based currency dealer does NOT invoke Section 988!!

Edited by Rabbi, 28 March 2012 - 03:16 PM.

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#11 pricestar8

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Posted 28 March 2012 - 03:29 PM

Rabbi
Would you be willing to put that writing. How much would you charge for your services.
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#12 Rabbi

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Posted 28 March 2012 - 08:44 PM

Rabbi
Would you be willing to put that writing. How much would you charge for your services.


I just put it in writing!!

Look, sooo many things in tax law are based on a "facts and circumstances" criteria.

On the one hand, we have the following quote taken verbatim from Publication 525, Taxable and Nontaxable Income:

."If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more han $200. If the gain is more than $200, report it as a capital gain."

Does this simple concept seem to fit the vast majority of us in this community? You bet your ass it does!!

On the other hand, let's look at Section 988. For that to apply, we would have to have received our foreign currency in a Section 988 tranaction. The term “section 988 transaction” is a transaction payable in a foreign currency AND is
1. from the acquisition of a debt instrument or from becoming the obligor under a debt instrument;
2. from the accruing any item of expense or gross income or receipts which is to be paid or received after the date on which so accrued or taken into account; or
3. from any forward contract, futures contract, option, or similar financial instrument.

These are the types of transactions into which a foreign-related business enters in order to protect itself from changes in exchange rates..

Now, when you exchanged your dollars for dinars, was there a debt instrument involved? Did you accrue any item of expense (i.e., an account-payable) or gross income (i.e, an account receivable) payable in a foreign currency at a later date? Did you enter into any foreign currency forward contract, futures contract, option, or similar instrument? If you can answer NO to all three of these question, then you didn't engage in a Section 988 transaction, and hence, Section 988 would NOT APPLY. It's that simple. All of this discussion a non-functional currency is irrelevant unless the non-functional currency is derived from a Section 988 tranaction.

I know that these two excerpts from Treasury Dept. sources seemingly conflict with each other, but they don't! They just apply to different facts and circumstances. One applies to personal transactions, the other applies to business transactions.

Edited by Rabbi, 28 March 2012 - 08:46 PM.

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#13 carlos in san diego

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Posted 28 March 2012 - 09:17 PM

The IRS has a rule conserning foreign transations."If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more han $200. If the gain is more than $200, report it as a capital gain." Does this mean when we cash in we pay the capital gain tax rate of 15%.


Welcome newbie M310e320! Don't worry about it until you do whatever you do with your dinar, until then, why worry? I got mine in Iraq in 04 and if I remember right I only paid $600 per mil back then, so I guess it's at a point where the dinar no longer owes me anything anymore...it's pretty much free and clear.

I should have reported capital gains, but...who's going to know? Kick back, release the death grip on the arms of the chair and have cold a beer! SALUD! Carlos
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#14 whatsthis

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Posted 28 March 2012 - 09:24 PM

The IRS has a rule conserning foreign transations."If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more han $200. If the gain is more than $200, report it as a capital gain." Does this mean when we cash in we pay the capital gain tax rate of 15%.



from my understanding from my CPA it all deepens on who long you have had the currency & he told me it could be as low as 15% & deepening on how much you made it could be as high as 39% but as some one else said check with a tax attorney to be sure of what you need to pay.
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#15 Xtaxguy

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Posted 28 March 2012 - 09:58 PM

As mentioned above, Section 988 applies ONLY in the context of ordinary business activities that have some foreign involvement. US businesses with foreign operations have all sorts of issues on when, how, and how much to report on their US returns, particularly when some or all of that business is conducted in foreign currencies. Subpart F of the IRC, and the extensive Regulations under it, provide these rules in excruciating detail, and Section 988 deals primarily in how to account for currency investments versus hedging transactions. First, FOR SUCH INTERNATIONAL BUSINESSES - AND ONLY FOR THEM, all such transactions by such a business or it's affiliates are presumed to be "attracted" to that business, and the results of such currency trades or options are treated as part of the ordinary gross income of such international businesses. However, even such international businesses can enter into foreign currency investments, options, or similar interests as "investments" that will be taxed as capital gains. They merely have to identify each such transaction for which they want capital gain treatment as a "capital investment" transaction when entered into. The Regs suggest several ways in which this can be done, but any clear and timely method is OK. When I worked in the tax dept of a very large multinational NYSE company, our staff economists would review all international currencies monthly, decide which, if any, of them might move significantly against the dollar, and then work with one of the accountants and me to determine the company's consolidated currency trading and translation exposures (they are different things), the cost to hedge against undesired gain or loss on each position, and the method of taking the hedge position and the tax consequences of the hedge transaction. We simply two accounts at the broker that handled these transactions, one labeled "Trading Account" and one labeled "Investment Account." Generally, the investment account was used to buy long term option contracts designed to mitigate foreign currency denominated long term assets and liabilities, such as buildings and the mortgages on them, and long term contracts to deliver or receive goods at specified prices. We almost always DID NOT want investment treatment back then. I suspect it's usually the other way around today. Yeah, it's complicated. First time I did it was an easy month, and took me a week to figure it out. Within six months I could do a tough month in a couple of hours. Like learning to ice skate.

The little subsection at the end of Section 988 regarding personal currency trade gains is for the comfort of traveling executives (who in theory might have an international business - i.e., their job!). I'd bet a shot of Famous Grouse that this provision exists solely because of a chat on a long plane flight between some CEO and an IRS international tax guy who were really bored, but it could be merely a seriously anal staff attorney on a Congressional committee. Section 988 is simply not relevant to anyone who has bought a big pile of IQDs, and maybe some VN Dong, and otherwise has no international activities.

Even if you frequently travel overseas, and have a place in some resort area, 988 IS NOT relevant unless you have an "Actively Conducted Trade or Business with International Activities" to which the proceeds from the sale of your currency could be attracted. If you do, find some way to designate in writing that you currency was acquired for investment purposes. Old letters, memos, etc. will do.

Sleep well my friends.
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#16 myrtle307

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Posted 28 March 2012 - 10:20 PM

I disagree with the statement made about the Dinar dealers filing info on who bought their Dinar. At no point did I fill out a form or provide my Social Security Number. When a transaction is reported to the IRS there is a form for you to sign or a Federal Tax ID number to provide. This does not occur when you purchase online through a dealer.
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