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REAL TAX INFORMATION


iraqiyodaman
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Please read the information on taxes for currencies bought for investment.........

Check this out http://www.maximadvisors.com/knowledge-library/international-tax-planning/US-Taxation-Foreign-Currency-Gains-Losses (sent by Yahoo! Toolbar) PLEASE READ.

US Taxation of Foreign Currency Gains or Losses

The general rule with regard to the U.S. tax treatment of gains or losses from exchanging U.S. currency for non U.S. currency (and back) is that the gain or loss on the currency exchange will now be taxed the same as the underlying transaction. The Taxpayer's Relief Act of 1997 included a provision [Act Section 1104(a)] that included some changes, which are included in the following explanation.

Where there are currency gains or losses in connection with a trade or business or with the management or administration of investment assets, the gain is treated as an ordinary gain (rather than as a capital gain) and any loss is generally treated as an expense.

Where currency gains or losses are incurred in connection with the purchase of an investment, the gain or loss on the currency change on realization (usually from selling) is a capital gain or loss and is included as part of the total capital gain or loss on the investment.

Currency gains of $200 or less that arise from personal transactions (not for investment or business) are not taxable, but any personal currency losses are not deductible. A personal transaction includes any gain or loss arising from travel even if the travel is business related. Any currency gains in excess of $200 per transaction (per trip or per purchase) are treated as a capital gain. Losses on currency exchanges for business travel also appear to be non-deductible.

The primary source of information on the tax treatment of currency gains or losses is IRC Section 988.

Tax Treatment from Various Situations

A number of my subscribers have presented me with the question of whether certain gains and losses on foreign investments are capital gains and losses and whether any net gains would be eligible for the 15% maximum tax on long term capital gains, if the holding period requirements are satisfied.

To answer this question, it's necessary to differentiate between different methods of acquiring an investment position in a foreign investment. The following is a non-technical interpretation of the rules in each of these situations.

1. The investor may purchase a foreign currency in exchange for U.S. dollars and hold the foreign currency as a capital asset. Any gain or loss would be a capital gain or loss.

2. The investor may purchase an indirect position in a foreign currency through the purchase of futures contracts, forward contracts, options or similar instruments, but the purchase is denominated in US dollars. Any gain on an unhedged position would be a capital gain or loss. Where the position involves the use of a hedge that meets the definition of a "straddle' transaction under IRC 1092, the unrealized gain or loss would be recognized as of the end of the tax year.

3. The investor may acquire a debt obligation denominated in a foreign currency. Unless the debt obligation is acquired in connection with a trade or business or an activity constituting the management of investments, any gain or loss will be treated as a capital gain or loss - subject to the provisions of the original issue discount rules. If the debt obligation is acquired in connection with a trade or business or arises from the management of investments (IRC 212) any gain or loss attributable to the conversion of the debt obligation into US dollars would be ordinary income or loss.

4. The investor may acquire an interest in foreign currencies through a trade or business (partnership or proprietorship) conducted in a foreign currency. To the extent that such interests are denominated in a non-functional (foreign) currency, any gain or loss on conversion of the currency to the US dollar would be an ordinary gain or loss.

5. The investor may purchase foreign stocks of publicly held operating corporations with U.S. dollars but the stocks are denominated in a foreign currency. Thus, part of the gain or loss on the foreign stock is derived from the change in currency values while holding the stock and part of the gain or loss is derived from changes in the dollar value of the underlying stock itself. To the extent that the stocks are purchased as investments, the entire gain or loss would be a capital gain or loss - subject to the CFC and PFIC rules.

To the extent that any investments in the form of currencies or debt obligations are acquired in connection with the operation of a trade or business (or in connection with expenses incurred in the management of investments) and are denominated in a foreign currency, any gains or losses arising from conversion of the investments or debt obligations back to the US dollar would be ordinary gains or losses.

6. The investor may purchase the shares of a controlled foreign corporation (CFC) and may be (A) an investor with less than a 10% interest in the corporation or may be (B) an investor with an interest of 10% or more of the controlled foreign corporation's stock.

Assuming the CFC is not also a PFIC (see below), the investor who owns less than a 10% interest in the CFC would not be subject to tax on the current income of the corporation. Any distributions from the CFC would be taxed as dividends. Any gain or loss on the sale of the stock in the CFC would be a capital gain or loss.

If the shareholder in the CFC owns 10% or more of the stock of the CFC, then that shareholder must report as current income, his or her pro-rata share of the "sub-part F" income of the CFC. Generally, that would include any passive investment income and certain other kinds of income as defined in IRC sections 951 through 954. Generally, "sub-part F income" does not include income from the operation of a business outside the US. If the foreign corporation has any US source income from doing business in the US, it will be required to file a tax return and pay corporate income taxes on that US source income. That income is therefore not treated as "sub-part F income" that is subject to inclusion in the tax returns of the US shareholders of the CFC.

7. The investor may purchase shares of a passive foreign investment company (mutual fund), which may be (A) a "qualified electing fund" or (B) a non-qualified fund.

For a qualified electing fund, the taxpayer will report his or her share of the current income of the PFIC in a manner similar to the shareholders of a US mutual fund. If the PFIC is not a qualified electing fund, the US shareholder will be taxed on any distributions from the fund when they are received. Distributions of current earnings of the PFIC will be taxed at the shareholder's regular tax rates. Distributions of accumulated income of the PFIC from previous years will be subject to tax at the highest ordinary income tax rate - which is presently 36%. (It's not clear whether the 10-% surtax for taxable income in excess of $250,000 is also applicable to such distributions.) In addition, the shareholder will be required to pay interest on the deferred distribution.

Source: By Vernon K. Jacobs, 2008 - The Offshore Press, www.offshorepress.com

Vernon K. Jacobs is a CPA, a Chartered Life Underwriter and a Fellow of the Life Management Institute. He is an international tax practitioner and tax author with a focus on international investing and insurance. He has been a college instructor in accounting, personal finance and corporate taxation, and has been a speaker at dozens of professional conferences and seminars. www.vernonjacobs.com

I LOVE IT !!!!!! GOOOOOOOOOOOOOOOOOOO DINAR GOOOOOOOOOOOOOOOOOOOOOO

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Also......

IRS publication 525 page 33 about half way down the page states......"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 than $200. If the gain is more than $200, report it as a capital gain."

The publication is available for download at www.irs.gov, just search publication 525 (see page 33).

Actually, here's the link: http://www.irs.gov/pub/irs-pdf/p525.pdf

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who ya gonna believe....some accountant or the IRS? I would seek a professional tax accountant who will contact the IRS directly before filing to get this cleared up. Unless your accountant is going to guarranty 'in writing" that he/she will pay all penalties and additional taxes when they are WRONG. B)

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Hi, My name is Mark. I'm an estate planning attorney. I've been reading lots of topics and posts on taxes going back and forth. Most indicate that people believe that income from exchanging Dinar for US $ will be treated as capital gains. This is what I used to believe too.

You'll find that I have put the same information into other posts, but I've never quite put it together this comprehensively before. The following answers both of your posts regarding the exchange being capital gains tax. It also adds other arguments you might hear in the future and answers them too. It also has corroboration from an "International Examiner" at the IRS. It is long, but I urge you to take the time to read and understand it.

__________________________________________________________________________________________________________________________________________________

I have read, "I talked to my CPA/attorney about this and they said it would definitely be ___________." (Fill in the blank with whatever you want it to be - I've seen it I think.) Since all professionals know the same stuff <coughing to self>, why don't we all see the same answer. I think there are two reasons. 1) We all know pretty much the same "basics" but not all the same specialized information. Those who think of currency exchange in relation to the basics immediately think, "appreciated asset = capital gains." However, if you know more than the basics . . . (read what follows).

GENERAL ANSWERS FOR ARGUMENTS IN support OF CAPITAL GAINS TREATMENT

I will not be at all disappointed if you do not believe or agree with what I post here. After all, a lot of intelligent people are saying otherwise. Here is the link to an article by a CPA, Vernon Jacobs, who seems to have better credentials than I do for dealing with foreign currency (he also charges more than me):

http://www.maximadvisors.com/knowledge-library/international-tax-planning/US-Taxation-Foreign-Currency-Gains-Losses (this is a link to the same article you posted above)

This article makes statements without supporting them. In my analysis, most of the statements made in the article agree with what is written in Section 988 (The section dealing with foreign currency). However, the most important one to us does not seem to agree with section 988. Why then should we believe Mr. Jacobs if his assertions are not explained instead of just stated? While I agree that this gentleman certainly seems to know what he is talking about and has impressive credentials, when I have so much contrary evidence I can not simply believe him because he said so. I need some sort of reference to the authority upon which he bases his claims. (Who knows - maybe he was having a bad day and just misstated something.)

Maybe you should believe him. (Maybe I should believe him.) Still, I don't feel comfortable being told something and staking so much on it without being told why. When I try to look into "why" I come up with a different result. Many other CPAs also agree with what I am about to share. The most convincing of which I will share at the end of the post.

Another oft mentioned reason for believing that the foreign currency is a "capital asset" that is subject to capital gains taxes is Internal Revenue Code (IRC) section 1221 which says that a "capital asset" is any asset held by the taxpayer except . . . . Nonfunctional (foreign) currency is not listed as an exception. People therefore surmise that if it is a capital asset, it gets capital gains treatment.

To correctly analyze this circumstance, you must understand that in legal construction, when there seems to be a conflict in language, specific language trumps general language. In other words, section 1221 does not need to spell out all of the ins and outs and exceptions when dealing with foreign currency because section 988 takes care of that. Section 988 is the more specific language when dealing with foreign currency and is thus controlling on the issue. Besides, there actually are times when "nonfunctional" currency might be considered a capital asset subject to capital gains. You might think of it like this. Foreign currency is a capital asset under section 1221 except where Section 988 says it is not.

Probably the biggest thing you will read/hear is, "I called the IRS and . . ." Invariably they point to publication 525 p 33 which says that for a personal foreign currency transaction there will be no recognition of the gain if is is less than $200 and recognized as Capital Gains if the gain is more than $200. The problem is that the IRS is tricky and while it certainly seems cut and dried, it is not. (More on this below.)

MY ANALYSIS OF THE TAXATION ON A DINAR INVESTMENT

Section 988 OR Section 1256?

The Internal Revenue Code (IRC) deals with foreign currency exchange profits and losses under two different Sections; 988 and 1256. The primary section, 988, deals with gains and losses as ordinary income (with one small exception). However, foreign currency investors are often able to opt out of Section 988 and have their investments treated as Capital Gains under Section 1256. Unfortunately, Section 1256 only applies to contracts (i.e. futures contracts and forward contracts) for regularly traded foreign currency. Even if Dinar were a regularly traded currency, I have not seen anyone saying, "I just purchased a spot contract on Dinar this morning. Go RV!!" What I see instead is that people have purchased Dinar either in an account or the physical currency and will hold that currency as long as they want to hold it. Therefore, even if Dinar were a regularly traded currency (which it is not), Section 1256 still does not apply. Therefore you are stuck under Section 988.

The Confusion of Section 988

Many people have looked at IRS Publication 525, Pg. 33 to justify their assertions that your Dinar RV income should be treated as Capital Gains. It states:

Foreign currency transactions. If you have

a gain on a personal foreign currency transac-

tion because of changes in exchange rates,

you do not have to include that gain in your

income unless it is more than $200. If the gain

is more than $200, report it as capital gain.

This sounds pretty cut and dried. However, you should never underestimate the confusion of the IRS or its code, the IRC. The above quote refers to a "personal . . . transaction." You might be surprised to know that what you have done is not a "personal transaction" under the language of Section 988. IRS Pub. 525 did not anticipated a situation where masses of individuals would be investing in foreign currency with hopes of obscene profits. This language is intended for the traveler who went to New Zealand on "holiday" and when they returned and exchanged back to dollars, they had a little bit of gain or loss. That is not your situation.

Breaking it Down

I figure the best way to make everything clear is to show you the part of Section 988 dealing with "Personal Transactions." and then explain it.

Section 988 (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. [So far it looks pretty good. This means

it will not be ordinary income. It will be treated like any

other asset and be Capital Gains.]

(2) Exclusion for certain personal transactions

If--

(A ) The preceding provisions of this section shall not apply to 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. [This means that if the gain is lower than $200 you don't even claim it.

However, if you exceed $200 then you are back to my previous statement.

Still looks pretty good. This is where the information for IRS Pub 525 comes from.

Unfortunately this is where most people stop.]

(3) Personal transactions

For purposes of this subsection, the term "personal transaction" means [finally a definition]

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). [and we still don't know what it "shall not include"]

You can see how this can get confusing. To really look at it, we should probably go to Section 162 and Section 212, but I'm going to skip 162 and tell you what 212 says:

Section 212. Expenses for production of income

In the case of an individual, there shall be allowed as a deduction all the ordinary

and necessary expenses paid or incurred during the taxable year--

(1) for the production of income

(2) for the management, conservation, or maintenance or property held for

the production of income; or

(3) in connection with the determination, collection, or refund of any tax.

Each Dinar purchase had expenses associated with it such as transaction fees, transportation fees, etc.... That is how the dealers stay in business. Since there WERE expenses related to the purchase of Dinar that "meet the requirements" of Section 212(1) and/or Section 212(2), the income associated with those transactions are specifically EXCLUDED from the definition of "personal transaction" under Section 988. Section 988 (e) "Application to individuals" - does not apply. Since (e) basically says that the provisions of Section 988 don't apply and now you can't use (e), you are back in a situation where the provisions of Section 988 DO apply. That means that you have ORDINARY INCOME. It even goes as far as to say that it should be looked at as "interest income."

A WAY OUT

Some people argue that they didn't have any expense associated with an investment or business transaction. However, there were transaction fees, transportation fees, etc... that "could" be deducted under section 212 as investment expenses. Since they "could" be deducted as investment expenses, this is not a "personal transaction."

The exception to this is if you absolutely had NO expenses associated with your Dinar that you "could" claim as investment expense. Since none of us got our Dinar in contemplation of an exotic vacation to the Iraqi deserts, the only way that happens is if you got it as a gift (not as an investment). Then you get capital gains treatment. (Be ready to prove it was a gift if you get audited.)

WHAT THE IRS THINKS OF MY ANALYSIS

To further corroborate my analysis of how the IRS would determine the tax on these transactions (not what we would like to believe), I sent my analysis to a friend who is a criminal investigator for the IRS. She forwarded it to an "International Examiner" who agreed with my analysis. (Perhaps when I get to my other computer I might post her email (with name removed) and attach the examples she sent that are used by the examiners in evaluating section 988. There is an example in the materials that specifically addresses selling foreign currency for US $ as a Section 988 Transaction.)

FINAL COMMENTS

As I said before, I am an "Estate Planning" attorney. I am not a tax attorney. I am tax trained with my undergrad being in accounting, receiving a certificate in tax from my law school, and working in a field where I am constantly looking at ways to help people save taxes. However, I am not above understanding that I can be wrong sometimes. If any of you have a brilliant tax attorney who has a way out of what I have just described, I'm sure we would all LOVE to hear about it. Until then, be safe with the IRS - it is ordinary income under Section 988.

Having said all of that - I don't believe guys like Vernon Jacobs just spew stuff out without reason. I really would like to understand his thoughts behind what he said. I'd love to be proved wrong, but until then. . . . I will practice an abundance of caution and go with what the International Examiner thought - ordinary income unless received as a gift.

Best of Blessings,

Mark

SHORTENED DISCLAIMER

Should put a disclaimer here - I am an attorney - you can't use this as legal advice and we do not have an attorney client relationship (Assume this goes for anything I ever write unless I am writing it just for you as my client.)

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Brilliant :) ...this is exactly how the IRS agents (2) explained it to me....ordinary income. Great post, good explanation. Thank you :D

Also, I believe the "plan" that Bush/Cheney/Fed put into motion that made this venture possible intended for this to be taxed as ordinary income from its inception. B)

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ExecConsult, I would like to make contact with you. My email address is on my DV profile page, but for some reason the system won't let me contact you via email from your profile page. Whenever you get a chance. Thanks. Great post, and also the same conclusion that was given to me by a local tax attorney in regards to Section 988. :)

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Exec Consult,

In order for everything you say to be true, the Dinar has to qualify as a "non functional currency" NO?

As we speak it is not accepted anywhere in the world except Iraq. Does it qualify as a non functional currency?

And why?

You answered your question yourself....it's non-functional because it isn't good anywhere Except in Iraq. It does not trade on any international markets. :) And when it RV's and does trade on the markets, we will not be selling our dinar on those markets through the different types of market instuments.....we'll simply be exchanging bthem in at a bank. That's why it will not qualify as a capital gain.....per the IRS.

However, once the dinar is traded on the forex....and you choose to buy and sell dinar instruments...those transactions will be capital gains :)

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If the Dinair RVs and is "functional currency" , Then we Cash in, Same Rules? Or new rules for "functional currency" ? I hope after the RV that the IRS will post some thing on their site..... Better Yet , I'll just Let my Wealth advisor and tax Man Take care of all that...Go RV 2010 :D

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What I read here is "income earned from foreign currency transactions" are to be treated as ordinary income. Income viewed outside of any gain or loss due to exchange rate changes between US dollar and foreign curreny I read as a capital gain or loss.

Section 988What Does Section 988 Mean?

A financial transaction involving a capital loss or gain on an investment held in a foreign currency. A Section 988 transaction relates to IRS Section 988, which was applied to all tax years after December 31, 1986. Per IRS rules, most gains from foreign currency transactions are to be treated as ordinary income, whether earned by an individual or a corporation. Gains and losses from these transactions are typically viewed outside of any gain or loss due to exchange rate changes between the U.S. dollar and the foreign currency. 988 Transactions include those surrounding holders of foreign bonds (who will receive interest and principle in a domestically "nonfunctional" currency), foreign currency futures or other derivatives, as well as accrued expenses or receipts in a foreign currency.

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Hi, My name is Mark. I'm an estate planning attorney. I've been reading lots of topics and posts on taxes going back and forth. Most indicate that people believe that income from exchanging Dinar for US $ will be treated as capital gains. This is what I used to believe too.

You'll find that I have put the same information into other posts, but I've never quite put it together this comprehensively before. The following answers both of your posts regarding the exchange being capital gains tax. It also adds other arguments you might hear in the future and answers them too. It also has corroboration from an "International Examiner" at the IRS. It is long, but I urge you to take the time to read and understand it.

__________________________________________________________________________________________________________________________________________________

I have read, "I talked to my CPA/attorney about this and they said it would definitely be ___________." (Fill in the blank with whatever you want it to be - I've seen it I think.) Since all professionals know the same stuff <coughing to self>, why don't we all see the same answer. I think there are two reasons. 1) We all know pretty much the same "basics" but not all the same specialized information. Those who think of currency exchange in relation to the basics immediately think, "appreciated asset = capital gains." However, if you know more than the basics . . . (read what follows).

GENERAL ANSWERS FOR ARGUMENTS IN support OF CAPITAL GAINS TREATMENT

I will not be at all disappointed if you do not believe or agree with what I post here. After all, a lot of intelligent people are saying otherwise. Here is the link to an article by a CPA, Vernon Jacobs, who seems to have better credentials than I do for dealing with foreign currency (he also charges more than me):

http://www.maximadvisors.com/knowledge-library/international-tax-planning/US-Taxation-Foreign-Currency-Gains-Losses (this is a link to the same article you posted above)

This article makes statements without supporting them. In my analysis, most of the statements made in the article agree with what is written in Section 988 (The section dealing with foreign currency). However, the most important one to us does not seem to agree with section 988. Why then should we believe Mr. Jacobs if his assertions are not explained instead of just stated? While I agree that this gentleman certainly seems to know what he is talking about and has impressive credentials, when I have so much contrary evidence I can not simply believe him because he said so. I need some sort of reference to the authority upon which he bases his claims. (Who knows - maybe he was having a bad day and just misstated something.)

Maybe you should believe him. (Maybe I should believe him.) Still, I don't feel comfortable being told something and staking so much on it without being told why. When I try to look into "why" I come up with a different result. Many other CPAs also agree with what I am about to share. The most convincing of which I will share at the end of the post.

Another oft mentioned reason for believing that the foreign currency is a "capital asset" that is subject to capital gains taxes is Internal Revenue Code (IRC) section 1221 which says that a "capital asset" is any asset held by the taxpayer except . . . . Nonfunctional (foreign) currency is not listed as an exception. People therefore surmise that if it is a capital asset, it gets capital gains treatment.

To correctly analyze this circumstance, you must understand that in legal construction, when there seems to be a conflict in language, specific language trumps general language. In other words, section 1221 does not need to spell out all of the ins and outs and exceptions when dealing with foreign currency because section 988 takes care of that. Section 988 is the more specific language when dealing with foreign currency and is thus controlling on the issue. Besides, there actually are times when "nonfunctional" currency might be considered a capital asset subject to capital gains. You might think of it like this. Foreign currency is a capital asset under section 1221 except where Section 988 says it is not.

Probably the biggest thing you will read/hear is, "I called the IRS and . . ." Invariably they point to publication 525 p 33 which says that for a personal foreign currency transaction there will be no recognition of the gain if is is less than $200 and recognized as Capital Gains if the gain is more than $200. The problem is that the IRS is tricky and while it certainly seems cut and dried, it is not. (More on this below.)

MY ANALYSIS OF THE TAXATION ON A DINAR INVESTMENT

Section 988 OR Section 1256?

The Internal Revenue Code (IRC) deals with foreign currency exchange profits and losses under two different Sections; 988 and 1256. The primary section, 988, deals with gains and losses as ordinary income (with one small exception). However, foreign currency investors are often able to opt out of Section 988 and have their investments treated as Capital Gains under Section 1256. Unfortunately, Section 1256 only applies to contracts (i.e. futures contracts and forward contracts) for regularly traded foreign currency. Even if Dinar were a regularly traded currency, I have not seen anyone saying, "I just purchased a spot contract on Dinar this morning. Go RV!!" What I see instead is that people have purchased Dinar either in an account or the physical currency and will hold that currency as long as they want to hold it. Therefore, even if Dinar were a regularly traded currency (which it is not), Section 1256 still does not apply. Therefore you are stuck under Section 988.

The Confusion of Section 988

Many people have looked at IRS Publication 525, Pg. 33 to justify their assertions that your Dinar RV income should be treated as Capital Gains. It states:

Foreign currency transactions. If you have

a gain on a personal foreign currency transac-

tion because of changes in exchange rates,

you do not have to include that gain in your

income unless it is more than $200. If the gain

is more than $200, report it as capital gain.

This sounds pretty cut and dried. However, you should never underestimate the confusion of the IRS or its code, the IRC. The above quote refers to a "personal . . . transaction." You might be surprised to know that what you have done is not a "personal transaction" under the language of Section 988. IRS Pub. 525 did not anticipated a situation where masses of individuals would be investing in foreign currency with hopes of obscene profits. This language is intended for the traveler who went to New Zealand on "holiday" and when they returned and exchanged back to dollars, they had a little bit of gain or loss. That is not your situation.

Breaking it Down

I figure the best way to make everything clear is to show you the part of Section 988 dealing with "Personal Transactions." and then explain it.

Section 988 (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. [So far it looks pretty good. This means

it will not be ordinary income. It will be treated like any

other asset and be Capital Gains.]

(2) Exclusion for certain personal transactions

If--

(A ) The preceding provisions of this section shall not apply to 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. [This means that if the gain is lower than $200 you don't even claim it.

However, if you exceed $200 then you are back to my previous statement.

Still looks pretty good. This is where the information for IRS Pub 525 comes from.

Unfortunately this is where most people stop.]

(3) Personal transactions

For purposes of this subsection, the term "personal transaction" means [finally a definition]

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). [and we still don't know what it "shall not include"]

You can see how this can get confusing. To really look at it, we should probably go to Section 162 and Section 212, but I'm going to skip 162 and tell you what 212 says:

Section 212. Expenses for production of income

In the case of an individual, there shall be allowed as a deduction all the ordinary

and necessary expenses paid or incurred during the taxable year--

(1) for the production of income

(2) for the management, conservation, or maintenance or property held for

the production of income; or

(3) in connection with the determination, collection, or refund of any tax.

Each Dinar purchase had expenses associated with it such as transaction fees, transportation fees, etc.... That is how the dealers stay in business. Since there WERE expenses related to the purchase of Dinar that "meet the requirements" of Section 212(1) and/or Section 212(2), the income associated with those transactions are specifically EXCLUDED from the definition of "personal transaction" under Section 988. Section 988 (e) "Application to individuals" - does not apply. Since (e) basically says that the provisions of Section 988 don't apply and now you can't use (e), you are back in a situation where the provisions of Section 988 DO apply. That means that you have ORDINARY INCOME. It even goes as far as to say that it should be looked at as "interest income."

A WAY OUT

Some people argue that they didn't have any expense associated with an investment or business transaction. However, there were transaction fees, transportation fees, etc... that "could" be deducted under section 212 as investment expenses. Since they "could" be deducted as investment expenses, this is not a "personal transaction."

The exception to this is if you absolutely had NO expenses associated with your Dinar that you "could" claim as investment expense. Since none of us got our Dinar in contemplation of an exotic vacation to the Iraqi deserts, the only way that happens is if you got it as a gift (not as an investment). Then you get capital gains treatment. (Be ready to prove it was a gift if you get audited.)

WHAT THE IRS THINKS OF MY ANALYSIS

To further corroborate my analysis of how the IRS would determine the tax on these transactions (not what we would like to believe), I sent my analysis to a friend who is a criminal investigator for the IRS. She forwarded it to an "International Examiner" who agreed with my analysis. (Perhaps when I get to my other computer I might post her email (with name removed) and attach the examples she sent that are used by the examiners in evaluating section 988. There is an example in the materials that specifically addresses selling foreign currency for US $ as a Section 988 Transaction.)

FINAL COMMENTS

As I said before, I am an "Estate Planning" attorney. I am not a tax attorney. I am tax trained with my undergrad being in accounting, receiving a certificate in tax from my law school, and working in a field where I am constantly looking at ways to help people save taxes. However, I am not above understanding that I can be wrong sometimes. If any of you have a brilliant tax attorney who has a way out of what I have just described, I'm sure we would all LOVE to hear about it. Until then, be safe with the IRS - it is ordinary income under Section 988.

Having said all of that - I don't believe guys like Vernon Jacobs just spew stuff out without reason. I really would like to understand his thoughts behind what he said. I'd love to be proved wrong, but until then. . . . I will practice an abundance of caution and go with what the International Examiner thought - ordinary income unless received as a gift.

Best of Blessings,

Mark

SHORTENED DISCLAIMER

Should put a disclaimer here - I am an attorney - you can't use this as legal advice and we do not have an attorney client relationship (Assume this goes for anything I ever write unless I am writing it just for you as my client.)

I am a retired member of the US Army, because I was medically retired this past April due to a lower back/leg injury I suffered while serviing in Iraq... I actually had 0 fees associated with my acquiring of IQD since I got it in Iraq. Since I did not have any fees that would be deductable I am thinking from your post I am good for capital gains tax.... Would this fit your bill of the exotic vacation to the Iraqi Desert?

Thanks for your time, and I understand your post is not professional advice just wondering your thoughts.

Iraqi Vet05-07

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I am a retired member of the US Army, because I was medically retired this past April due to a lower back/leg injury I suffered while serviing in Iraq... I actually had 0 fees associated with my acquiring of IQD since I got it in Iraq. Since I did not have any fees that would be deductable I am thinking from your post I am good for capital gains tax.... Would this fit your bill of the exotic vacation to the Iraqi Desert?

Thanks for your time, and I understand your post is not professional advice just wondering your thoughts.

Iraqi Vet05-07

The safest rout to take would be to hire an attorney to request a private letter ruling from the IRS (PLR) to determine how they will view the income in your specific case. However, obtaining a PLR through an attorney who knows what they are doing can be expensive. You may also want to try the following:

In my unofficial NON-legal opinion - you have good standing to claim capital gains treatment. However, if the IRS determines that your underlying purpose in having the Dinar is for investment purposes, they may still determine that you have ordinary income.

What I would do is pay capital gains rates then take the difference between the ordinary income tax amount and the amount you paid and place it an interest bearing account. We'll call that your "just-in-case" account. That way, if the IRS "re-characterizes" your income, you have a choice. You will either have money to pay the additional assessed taxes plus interest or you can use the money the IRS is trying to claim to hire an attorney and fight them. After three years, if the IRS has left you alone, you should be okay to spend the money from your "just-in-case" account.

Hope this helps.

Best of Blessings,

Mark

Does all this still apply if I go exchange to, say the euro and go live in Europe? The point being, avoid exchanging to USD.

I am by no means experienced in in international taxation. I know there are members of the forum who have studied it, but I'll tell you what simple things I do know. Under the Internal Revenue Code if you exchange one asset (Dinar) for another (Euros) you will have a barter transaction. Your gain or loss is figured based on the value of what you received in the transaction. Therefore, you would take the value of the Euros and subtract what you had to pay to get your Dinar. The difference is your income. Since the income was generated by "disposition of non-functional currency" under Section 988 the type of gain you would have is typically ordinary income.

Best of Blessings,

Mark

If the Dinair RVs and is "functional currency" , Then we Cash in, Same Rules? Or new rules for "functional currency" ? I hope after the RV that the IRS will post some thing on their site..... Better Yet , I'll just Let my Wealth advisor and tax Man Take care of all that...Go RV 2010 :D

Still goes under the same rules. It will still be non-functional currency because that is just the IRS's fancy way of saying "foreign" currency. The other thing you may be thinking of is whether it is a currency that is generally traded so that you can get section 1256 capital gains treatment. Even if it becomes generally traded on the forex markets, you still won't be able to get capital gains from that either because the capital gains treatment under section 1256 is only for foreign currency "contracts." You are not holding a spot contract or a forward contract. You own the physical currency. I know it's a bummer.

Best of Blessings,

Mark

What I read here is "income earned from foreign currency transactions" are to be treated as ordinary income. Income viewed outside of any gain or loss due to exchange rate changes between US dollar and foreign curreny I read as a capital gain or loss.

Section 988What Does Section 988 Mean?

A financial transaction involving a capital loss or gain on an investment held in a foreign currency. A Section 988 transaction relates to IRS Section 988, which was applied to all tax years after December 31, 1986. Per IRS rules, most gains from foreign currency transactions are to be treated as ordinary income, whether earned by an individual or a corporation. Gains and losses from these transactions are typically viewed outside of any gain or loss due to exchange rate changes between the U.S. dollar and the foreign currency. 988 Transactions include those surrounding holders of foreign bonds (who will receive interest and principle in a domestically "nonfunctional" currency), foreign currency futures or other derivatives, as well as accrued expenses or receipts in a foreign currency.

Section 988 deals not only with investments such as ours where we are investing in a currency hoping the currency will appreciate. More often it deals with investments other than the currency that are priced with reference to a foreign (ie non-functional) currency. For instance, if I open a Warka account and invest in the Iraqi stock market, the gains will be figured with relation to a non-functional currency, but will be made as the companies I invested in grow (independent from exchange rates). That is what your quote is talking about.

Best of Blessings,

Mark

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Ordinary income is taxed at 35% after a certain amount (I think it's $250,000).

That's actually good news for short term investors. Cash in as of Jan. 1, and you can invest the money and NOT pay taxes on it for 13 months (April 2012)..

Cap gains tax has to be paid quarterly if I'm not mistaken.

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Hi, My name is Mark. I'm an estate planning attorney. I've been reading lots of topics and posts on taxes going back and forth. Most indicate that people believe that income from exchanging Dinar for US $ will be treated as capital gains. This is what I used to believe too.

You'll find that I have put the same information into other posts, but I've never quite put it together this comprehensively before. The following answers both of your posts regarding the exchange being capital gains tax. It also adds other arguments you might hear in the future and answers them too. It also has corroboration from an "International Examiner" at the IRS. It is long, but I urge you to take the time to read and understand it.

__________________________________________________________________________________________________________________________________________________

I have read, "I talked to my CPA/attorney about this and they said it would definitely be ___________." (Fill in the blank with whatever you want it to be - I've seen it I think.) Since all professionals know the same stuff <coughing to self>, why don't we all see the same answer. I think there are two reasons. 1) We all know pretty much the same "basics" but not all the same specialized information. Those who think of currency exchange in relation to the basics immediately think, "appreciated asset = capital gains." However, if you know more than the basics . . . (read what follows).

GENERAL ANSWERS FOR ARGUMENTS IN support OF CAPITAL GAINS TREATMENT

I will not be at all disappointed if you do not believe or agree with what I post here. After all, a lot of intelligent people are saying otherwise. Here is the link to an article by a CPA, Vernon Jacobs, who seems to have better credentials than I do for dealing with foreign currency (he also charges more than me):

http://www.maximadvisors.com/knowledge-library/international-tax-planning/US-Taxation-Foreign-Currency-Gains-Losses (this is a link to the same article you posted above)

This article makes statements without supporting them. In my analysis, most of the statements made in the article agree with what is written in Section 988 (The section dealing with foreign currency). However, the most important one to us does not seem to agree with section 988. Why then should we believe Mr. Jacobs if his assertions are not explained instead of just stated? While I agree that this gentleman certainly seems to know what he is talking about and has impressive credentials, when I have so much contrary evidence I can not simply believe him because he said so. I need some sort of reference to the authority upon which he bases his claims. (Who knows - maybe he was having a bad day and just misstated something.)

Maybe you should believe him. (Maybe I should believe him.) Still, I don't feel comfortable being told something and staking so much on it without being told why. When I try to look into "why" I come up with a different result. Many other CPAs also agree with what I am about to share. The most convincing of which I will share at the end of the post.

Another oft mentioned reason for believing that the foreign currency is a "capital asset" that is subject to capital gains taxes is Internal Revenue Code (IRC) section 1221 which says that a "capital asset" is any asset held by the taxpayer except . . . . Nonfunctional (foreign) currency is not listed as an exception. People therefore surmise that if it is a capital asset, it gets capital gains treatment.

To correctly analyze this circumstance, you must understand that in legal construction, when there seems to be a conflict in language, specific language trumps general language. In other words, section 1221 does not need to spell out all of the ins and outs and exceptions when dealing with foreign currency because section 988 takes care of that. Section 988 is the more specific language when dealing with foreign currency and is thus controlling on the issue. Besides, there actually are times when "nonfunctional" currency might be considered a capital asset subject to capital gains. You might think of it like this. Foreign currency is a capital asset under section 1221 except where Section 988 says it is not.

Probably the biggest thing you will read/hear is, "I called the IRS and . . ." Invariably they point to publication 525 p 33 which says that for a personal foreign currency transaction there will be no recognition of the gain if is is less than $200 and recognized as Capital Gains if the gain is more than $200. The problem is that the IRS is tricky and while it certainly seems cut and dried, it is not. (More on this below.)

MY ANALYSIS OF THE TAXATION ON A DINAR INVESTMENT

Section 988 OR Section 1256?

The Internal Revenue Code (IRC) deals with foreign currency exchange profits and losses under two different Sections; 988 and 1256. The primary section, 988, deals with gains and losses as ordinary income (with one small exception). However, foreign currency investors are often able to opt out of Section 988 and have their investments treated as Capital Gains under Section 1256. Unfortunately, Section 1256 only applies to contracts (i.e. futures contracts and forward contracts) for regularly traded foreign currency. Even if Dinar were a regularly traded currency, I have not seen anyone saying, "I just purchased a spot contract on Dinar this morning. Go RV!!" What I see instead is that people have purchased Dinar either in an account or the physical currency and will hold that currency as long as they want to hold it. Therefore, even if Dinar were a regularly traded currency (which it is not), Section 1256 still does not apply. Therefore you are stuck under Section 988.

The Confusion of Section 988

Many people have looked at IRS Publication 525, Pg. 33 to justify their assertions that your Dinar RV income should be treated as Capital Gains. It states:

Foreign currency transactions. If you have

a gain on a personal foreign currency transac-

tion because of changes in exchange rates,

you do not have to include that gain in your

income unless it is more than $200. If the gain

is more than $200, report it as capital gain.

This sounds pretty cut and dried. However, you should never underestimate the confusion of the IRS or its code, the IRC. The above quote refers to a "personal . . . transaction." You might be surprised to know that what you have done is not a "personal transaction" under the language of Section 988. IRS Pub. 525 did not anticipated a situation where masses of individuals would be investing in foreign currency with hopes of obscene profits. This language is intended for the traveler who went to New Zealand on "holiday" and when they returned and exchanged back to dollars, they had a little bit of gain or loss. That is not your situation.

Breaking it Down

I figure the best way to make everything clear is to show you the part of Section 988 dealing with "Personal Transactions." and then explain it.

Section 988 (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. [So far it looks pretty good. This means

it will not be ordinary income. It will be treated like any

other asset and be Capital Gains.]

(2) Exclusion for certain personal transactions

If--

(A ) The preceding provisions of this section shall not apply to 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. [This means that if the gain is lower than $200 you don't even claim it.

However, if you exceed $200 then you are back to my previous statement.

Still looks pretty good. This is where the information for IRS Pub 525 comes from.

Unfortunately this is where most people stop.]

(3) Personal transactions

For purposes of this subsection, the term "personal transaction" means [finally a definition]

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). [and we still don't know what it "shall not include"]

You can see how this can get confusing. To really look at it, we should probably go to Section 162 and Section 212, but I'm going to skip 162 and tell you what 212 says:

Section 212. Expenses for production of income

In the case of an individual, there shall be allowed as a deduction all the ordinary

and necessary expenses paid or incurred during the taxable year--

(1) for the production of income

(2) for the management, conservation, or maintenance or property held for

the production of income; or

(3) in connection with the determination, collection, or refund of any tax.

Each Dinar purchase had expenses associated with it such as transaction fees, transportation fees, etc.... That is how the dealers stay in business. Since there WERE expenses related to the purchase of Dinar that "meet the requirements" of Section 212(1) and/or Section 212(2), the income associated with those transactions are specifically EXCLUDED from the definition of "personal transaction" under Section 988. Section 988 (e) "Application to individuals" - does not apply. Since (e) basically says that the provisions of Section 988 don't apply and now you can't use (e), you are back in a situation where the provisions of Section 988 DO apply. That means that you have ORDINARY INCOME. It even goes as far as to say that it should be looked at as "interest income."

A WAY OUT

Some people argue that they didn't have any expense associated with an investment or business transaction. However, there were transaction fees, transportation fees, etc... that "could" be deducted under section 212 as investment expenses. Since they "could" be deducted as investment expenses, this is not a "personal transaction."

The exception to this is if you absolutely had NO expenses associated with your Dinar that you "could" claim as investment expense. Since none of us got our Dinar in contemplation of an exotic vacation to the Iraqi deserts, the only way that happens is if you got it as a gift (not as an investment). Then you get capital gains treatment. (Be ready to prove it was a gift if you get audited.)

WHAT THE IRS THINKS OF MY ANALYSIS

To further corroborate my analysis of how the IRS would determine the tax on these transactions (not what we would like to believe), I sent my analysis to a friend who is a criminal investigator for the IRS. She forwarded it to an "International Examiner" who agreed with my analysis. (Perhaps when I get to my other computer I might post her email (with name removed) and attach the examples she sent that are used by the examiners in evaluating section 988. There is an example in the materials that specifically addresses selling foreign currency for US $ as a Section 988 Transaction.)

FINAL COMMENTS

As I said before, I am an "Estate Planning" attorney. I am not a tax attorney. I am tax trained with my undergrad being in accounting, receiving a certificate in tax from my law school, and working in a field where I am constantly looking at ways to help people save taxes. However, I am not above understanding that I can be wrong sometimes. If any of you have a brilliant tax attorney who has a way out of what I have just described, I'm sure we would all LOVE to hear about it. Until then, be safe with the IRS - it is ordinary income under Section 988.

Having said all of that - I don't believe guys like Vernon Jacobs just spew stuff out without reason. I really would like to understand his thoughts behind what he said. I'd love to be proved wrong, but until then. . . . I will practice an abundance of caution and go with what the International Examiner thought - ordinary income unless received as a gift.

Best of Blessings,

Mark

SHORTENED DISCLAIMER

Should put a disclaimer here - I am an attorney - you can't use this as legal advice and we do not have an attorney client relationship (Assume this goes for anything I ever write unless I am writing it just for you as my client.)

ExecConsult,

Using your explanation. If I were to purchase for example 2 Million IQD, and then gift it to a family member, it would then fall under capital gains tax at 15%. However, do the same terms apply to it as say would be for stocks as far as the tax rate on short term vs. long term capital gains? So to give an example, I purchase 2 Million Dinar on lets say November 22, 2010. Then I turn around and gift that Dinar to my sister. The RV happens at the end of 2010 or beginning of 2011. She then cashes it in, and realizes a capital gain. But is it taxed at 15%, or at the 35% rate which is what short term capital gains is due to the amount of time it was held?

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ExecConsult,

Using your explanation. If I were to purchase for example 2 Million IQD, and then gift it to a family member, it would then fall under capital gains tax at 15%. However, do the same terms apply to it as say would be for stocks as far as the tax rate on short term vs. long term capital gains? So to give an example, I purchase 2 Million Dinar on lets say November 22, 2010. Then I turn around and gift that Dinar to my sister. The RV happens at the end of 2010 or beginning of 2011. She then cashes it in, and realizes a capital gain. But is it taxed at 15%, or at the 35% rate which is what short term capital gains is due to the amount of time it was held?

Yes, same applies - 35% because short-term. However, one note of caution to those of you claiming to have given to sister (or aunt or whomever) more than a year ago. 1) Don't be dishonest with IRS. 2) There are all kinds of potential problems with thinking you will give to sister who will then give back to you after paying reduced rate. -- ALL KINDS of PROBLEMS. Don't want to go into them now. It's late.

Best of Blessings - Merry Christmas

Mark

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As the original article seem's self explanitory,i'm confused about marks comments.It' states a provision for the 988 tax code called the 1997 tax-payer releif act was instated to address this very situation .The code seem's to be an addendum to to 988 and 1256 to deal with scenario's just like the one we are involved with.It seemed to me this was written and passed by congress to clarify the previous codes in plain english or direct statements as marc put it instead of confusing non-direct language addressing our actual situation.Whitch is the purchace or exchange of actual currrancy as an investment for personal or corporate gain.None of us made a personal transaction and just find ourselves with left-over dinar after our trip to the world's largest cat box for vacation.So my question is to Marc i guess.What is it about this article originally posted to find incorrect or objectionable?It seems as if it is plain & simple as 1,2,3 and in simple english not lawyer credit card lingo a contract attourney writes.

Not being adversarial.I just don't see what i'm missing here in that article!I definately will show a tax attourney this article though, i saved it actually.By the way Marc i'm not an attourney or do i know anything substancial other than what ive read from your post's now and in the past,and others posting oppinions with disclaimer's after their statement's.So don't kill me for the question, i'm just not seeig your side of the equation.Actually if from a client perspective .If two different attourney's gave me the same differing articles as advice [the original post and yours]for my free consultation.I would be hiring the firm who wrote the article.Only because of some of the statement's i made earlier about it seeming cut and dry.Thanks for your post and any other comment's :D

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As the original article seem's self explanitory,i'm confused about marks comments.It' states a provision for the 988 tax code called the 1997 tax-payer releif act was instated to address this very situation .The code seem's to be an addendum to to 988 and 1256 to deal with scenario's just like the one we are involved with.It seemed to me this was written and passed by congress to clarify the previous codes in plain english or direct statements as marc put it instead of confusing non-direct language addressing our actual situation.Whitch is the purchace or exchange of actual currrancy as an investment for personal or corporate gain.None of us made a personal transaction and just find ourselves with left-over dinar after our trip to the world's largest cat box for vacation.So my question is to Marc i guess.What is it about this article originally posted to find incorrect or objectionable?It seems as if it is plain & simple as 1,2,3 and in simple english not lawyer credit card lingo a contract attourney writes.

Not being adversarial.I just don't see what i'm missing here in that article!I definately will show a tax attourney this article though, i saved it actually.By the way Marc i'm not an attourney or do i know anything substancial other than what ive read from your post's now and in the past,and others posting oppinions with disclaimer's after their statement's.So don't kill me for the question, i'm just not seeig your side of the equation.Actually if from a client perspective .If two different attourney's gave me the same differing articles as advice [the original post and yours]for my free consultation.I would be hiring the firm who wrote the article.Only because of some of the statement's i made earlier about it seeming cut and dry.Thanks for your post and any other comment's :D

I would never bash someone for an honest question or disagreement gator. No worries.

The 1997 tax-payer relief act dealt with a LOT of things. One small part (1104(a)) as the article states) created an amendment to section 988 of the internal revenue code. The code as you see it broken down in my analysis is the current code as amended by the tax-payer relief act. The only place that Mr. Jacobs and I disagree is his statement number 1:

1) The investor may purchase a foreign currency in exchange for U.S. dollars and hold the foreign currency as a capital asset. Any gain or loss would be a capital gain or loss.

You are completely correct xxxgator, that the way the article states it is "simple as 1,2,3." However, it is also wrong. That statement does not fit the law the article refers to. I'm thinking maybe its a typo or someone is misquoting Mr. Jacobs. I can't see how an educated professional could read the same law carefully and make the statement he did.

Now you have two conflicting opinions of professionals (plus my corroboration from the IRS agents). You have my explanation about why I think that the IRS agents and I are correct and Vernon K. Jacobs is wrong. The only thing we are missing is an explanation of why Mr. Jacobs thinks his position is correct. (Every time I have read someone say, "my CPA said . . . ," I ask for an explanation and I have yet to get a response.) If we could ever get that explanation, you would have all the information you need to make an informed decision about how you will proceed.

(I personally don't think that explanation will ever come because once the CPA starts digging in to things to find the explanation, they find out my analysis is correct. Of course that could just be me being overly confident. I wish I was wrong.)

Best of Blessings,

Mark

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exec consult:

I too am a tax professional and came to the same conclusion re: ordinary income. It actually doesnt matter in my case. I was turned on to this by a client and we are both short term so no effect on us - yet.

I just wanted to commend you on your efforts to get the word out. I just joined the forum but have been reading a while and your advice has been sound every time.

Other members - when this thing happens print these posts out and give to your tax advisor. It will give them a launching point. This will save them time and you money

Thanks again

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EXECTCONSULT, A QUESTION, I MYSELF FOLLOW YOUR LOGIC AND HOPE THAT YOU ARE CORRECT; HOWEVER, I WAS WONDERING AT WHAT TAX RATE WOULD A 1MIL DINAR TRADE BE TAXED IF IT RVd AT SAY $1? WOULD THIS BE LESS THAN THE 35% CAP TAX?

ALSO I MYSELF LIVE I WICHITA KS AND WOULD VERY MUCH LIKE TO TALK WITH YOU, NOT ONLY ABOUT THIS BUT ABOUT ESTATE PLANNING, SEEING THAT I WILL SOON HAVE AN ESTATE TO NEEDS PLANED. YOU CAN FIND MY EMAIL ON MY PROFILE

THANK YOU FOR YOUR POST.

I could not email you from your profile. So I left a message on your profile.

Best of Blessings,

Mark

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Hey Mark,

I have been reading your posts and have found your information very useful. I was wondering if you could possibly shed some light on my scenerio.

I was turned onto investing in the Iraqi Dinar in 2004 by a few fireman co-workers of mine that were veterans of the war in iraq. They convinced me to take a chance on it and told me to just put it away and sit on it until things stabalize in the region. As of right now I am excited about the wait and possibilities of what lies ahead!

I wound up buying 1 million dinar and like I said, have been sitting on them for 6 years already. I bought them off an Online website(25,000 bills), and paid a transaction fee and tax. Where does that put me as far as Capital Gains or Ordinary income tax? If and when I cash out back to USD, am I going to be paying 15% tax or 35% tax on the conversion to USD?

Obviously we all want to find a way to pay as less as we have to in taxes. Just wondering what would happen with me, and my best options!

thanks,

-Chris

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