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WHAT REALLY IS THE TAX RATE ON CURRENCY EXCHANGE?


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#1 4aprofit

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Posted 16 July 2011 - 12:41 AM

WHAT REALLY IS THE TAX RATE ON CURRENCY EXCHANGE?

Ignorance is no excuse, or that's what I'm sure some will be told even after they paid what was supposed to be the proper amount of taxation...as you can call 10 CPA's, 10 IRS Agents and 10 Tax Attorney's, and I'm sure that all of them will give you at least somewhat of a different answer as per what taxes will or won't be...IMO...get a Tax Attorney, CPA, Etc...to give you a "Pre-Determined Tax Ruling", as per what your taxes will be before any Cash-In is even done...(This is obtained in writing from the IRS)...that way there's most likely no come-back on you later on...which sometimes can be very devestating and costly in most instances...Especially since it may be a large enough amount of money coming one's way, that it might not matter in comparison to what you could lose later on....but this should be something to consider?...Any other's thought's?....
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#2 dinarcimi

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Posted 16 July 2011 - 12:47 AM

Good advice. I'm personally going to have a tax attorney go over everything first, no matter what the rate and date but most definately before cash in.
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#3 ExecConsult

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Posted 22 July 2011 - 09:34 AM

The pre-determined ruling that you mention is called a Private Letter Ruling. The IRS does not always grant them, but I see no reason that they shouldn't unless the IRS has already given guidance on the topic in question. They cost between about $600 and $10,000 and that is just what the IRS charges. It does not cover attorneys fees for researching and drafting the request. They sometimes come back within a month or two but are often delayed six months or more. The more complex the issue, the more it costs and the longer it will take to get the PLR answer.

There are other options. First, it is possible that the IRS will give guidance on this issue as part of their annual bulletin. The possibility is made higher by the fact that one dinar investor attorney convinced another dinar investor attorney to draft a recommendation to be placed on the Guidance Priority List. I am the one who did the drafting and submitted it to the IRS. I have posted the text here:

http://dinarvets.com...witching-sides/

Your second option would be the PLR as discussed above. The third option is simply to determine with your attorney and/or CPA what the law will support you doing and do it. You will of course discuss the potential of the IRS disagreeing with you and what to do if that happens (i.e. pay up or fight).

The way things stand now is that it is evident by drafting in the regulations that the intent of the governing law (section 988) is to have you pay ordinary income on any currency exchange gains unless there is no business or investment intent behind the exchange. In our situation there most certainly IS investment intent and therefore we would fall under ordinary income. However, there is an exception drafted into section 988 for "personal transactions" for things such as travel. Those are given capital gains treatment for gains and any losses are not reportable. The question for all of us is "can we escape the intent of the law and fit into the exception because of the letter of the law (the way it was drafted)"? (For more information on this see the IRS submission at the link above.)

Also, the only reasons to have this information before you exchange are 1) IF you can in fact claim capital gains treatment, it might be worth holding dinar for a few more months to move from the short-term (35%) to the long-term (15%) category AND 2) if you are trying to determine if you will use charitable planning vehicles such as a charitable remainder trust or gift annuity it would be important to fund either with physical dinar instead of with USD. Therefore it would be essential to make the determination about whether it would fit your plans to use such planning before making and exchange.

Outside of those reasons, exchanging will not make difference (that I can think of) as to what your eventual tax treatment will be.

Hope this is helpful.

Best of Blessings,
Mark
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#4 Snatcher

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Posted 22 July 2011 - 10:37 AM

WHAT REALLY IS THE TAX RATE ON CURRENCY EXCHANGE?

Ignorance is no excuse, or that's what I'm sure some will be told even after they paid what was supposed to be the proper amount of taxation...as you can call 10 CPA's, 10 IRS Agents and 10 Tax Attorney's, and I'm sure that all of them will give you at least somewhat of a different answer as per what taxes will or won't be...IMO...get a Tax Attorney, CPA, Etc...to give you a "Pre-Determined Tax Ruling", as per what your taxes will be before any Cash-In is even done...(This is obtained in writing from the IRS)...that way there's most likely no come-back on you later on...which sometimes can be very devestating and costly in most instances...Especially since it may be a large enough amount of money coming one's way, that it might not matter in comparison to what you could lose later on....but this should be something to consider?...Any other's thought's?....


Here's a nice little calculator that i found for this yrs taxes...Just enter in what you think you might cash in into the capital gains part or the normal income part and will give you what your taxes would be. I did the normal,long term gains, and short term gains, since know one knows for sure just to see and ouch they take almost 39% out for short term and normal taxes. It also shows you what it will be when the bush cuts end,what the democrats want, and the compromise taxes. http://interactive.t...on.org/taxcalc/
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