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Unfortunately it does not change any of the rules for you (except that you might be able to delay filing your return). The "Tax Free" part is only for "military pay." It would not apply to any other sources of income. For more information please look at the IRS Publication 3: http://www.irs.gov/formspubs/article/0,,id=242858,00.html (This will not automatically turn into the correct link. You must copy and past in your browser.) Hope that is helpful. Best of Blessings, Mark

To make answering this easier, I copied the following from my Dinar Tax Blog. The entire blog post can be found here: http://whatisiraqidinar.com/archives/42 Dinar investors make frequent reference to Publication 525 Pg. 33 which quotes the personal-use rule found in Section 988. People have the tendency to say, “I don’t know what you are talking about, but it tells me capital gains right there in black and white and that is good enough for me.” To make matters even worse people mistakenly rely upon calls to the Customer Care Department of the IRS. Too often, the call center employee will do a search, come up with Publication 525 Pg. 33 and, with apparent authority, tell the caller that for a “Personal Transaction” the gains are to be treated as capital gains. SO WHY IS THIS WRONG? The most popularly repeated tale of how a person found out for sure that taxes would be capital gains has to do with a call made to the IRS on 03-14-2011. The caller was transferred to the “Complex Individual Issues” department. (This sounds important but it is still part of Customer Care.) The caller spoke with a “Mr. Kirk ID# 5906613 who informed the caller that this would be taxed as capital gains. I have typed till I was blue in the fingers trying to tell people otherwise but to no avail, so I thought I’d try speaking their language. I CALLED THE IRS TOO!! I requested to be transferred to the “Complex Individual Issues” section of Customer Care. I spoke with Mr. Colbert ID# 1000220899. He informed me that NONE of the people from customer care (including Mr. Kirk ID# 5906613) has been trained on section 988. NONE of them are qualified to answer questions about gains from foreign currency exchange rates. They have a list of things they are not supposed to give answers about and the topic of foreign currency transactions is on the list. He suggested that I talk to a certified public accountant about it. (You mean like Mr. Robert Green who posted about the same thing on Forbes website?) The next argument I sometimes get is that even if Mr. Kirk was not “officially” qualified to counsel people on Section 988 and currency exchange gains, he still knows what he is talking about and has the documentation to back it up. “It is right there in black and white in IRS Publication 525 Pg. 33. The IRS says it is supposed to be Capital Gains.” Often readers do not understand that you can not rely upon IRS publications. Sounds silly right? “They IRS said it. Whad’da ya mean I can’t rely on it?” Unfortunately, that is the case. Look at the following quote from the case Caterpillar Tractor Co. v. United States: “It is unfortunately all too common for government manuals, handbooks, and in-house publications to contain statements that were not meant or are not wholly reliable. If they go counter to governing statutes and regulations of the highest or higher dignity, e.g. regulations published in the Federal Register, they do not bind the government, and PERSONS RELYING ON THEM DO SO AT THEIR OWN PERIL.” [emphasis added] (589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978)) However, in our case this still does not completely answer the argument because the law says the same thing as the publication. The language in Pub. 525 is almost a direct quote from Section 988 (e )(2 )(A ) & (B ). Here is the real answer to the argument. The publication does not go on to quote the very next lines of 988 (subsection 988 (e )(3 )) which indicates that a transaction of a business or investment nature is NOT qualified as a “Personal Transaction.” Who knew the IRS was so sneaky? Well, it may not be sneakiness that is the problem here, but one lesson to learn from this situation is that whenever something the IRS says looks cut and dried, look deeper and (as Mr. Colbert of Complex Individual Issues at the IRS said) seek the counsel of a professional. Best of Blessings, Mark A. Galloway, Esq. P.S. For a more detailed tax analysis, see my blog here: http://whatisiraqidinar.com/dinar-income-tax-analysis

Saint - Not only is it okay, but I am pleased that you do so. There is so much incorrect information floating around and I really want as many people as possible to have correct information. In fact I even started a blog for the same purpose. You are more than welcome to recommend people to read what I have written on this site. Best of Blessings, Mark

I'm grateful that I have been able to be of some help. You might also like to read (and/or refer your friends to) the following tax analysis of the dinar situation: http://whatisiraqidinar.com/dinar-income-tax-analysis This is my most recent work on the subject. In it I include the opinions of other professionals. I also tried to make it as understandable as possible. Best of Blessings, Mark

There are several IRA companies that would be willing to purchase dinar for a self directed IRA. Entrust used to have a relationship with DinarTrade and got a lot of recognition that way. Earlier on, when I was looking into this technique I did a post which can be found here: In that post I listed the following companies to use: Summit Trust (www.summittrust.com) Pensco Trust (www.penscotrust.com) Equity Trust Company (www.trustetc.com) Entrust IRA Services Inc. 201 Wilshire Blvd. Santa Monica CA 90401 (310) 899-3811 www.theentrustgroup.com However, since that time I have been recommending another IRA Custodian, NAFEP.com. I have sent several people to them and when I have received feedback it has all been positive. NAFEP was set up as an IRA company to hold hard assets like gold and silver. They are willing to purchase dinar and will hold the dinar in their gold vaults. Hope that is helpful. Best of Blessings, Mark

Thanks for your kind words. I was going through this post this morning because I thought it worthy of adding to my dinar tax blog and I realized I had typed something wrong that needs to be corrected. Above I said: That makes absolutely no sense with the point I was trying to make about how CPAs and attorneys get it wrong - that is because that is NOT what the law says at all. it should have read: REMEMBER: this is why they get it WRONG. the law goes on to indicate that the capital gains exception in (e )(2 ) does not apply to us as investors. I am only making this point to correct my typo. Best of Blessings, Masrk

I have just come back and read the following: This is of course exactly what I would expect any CPA or tax attorney to say initially. In fact, it is the exact same thing I said when someone first approached me with it. What you have to understand is that EVERY tax professional is trained to think, "APPRECIATED ASSET = CAPITAL GAINS TREATMENT." We know it to be an absolute fact. It is just like you know "'I' before 'E' when spelling. Let me ask both of you a question. Biker and Captjohn - Did you pay your CPA to research the issue and draft an opinion letter for you or did they just have an answer ready for you as they have been trained - "Appreciated Asset = Capital Gains." My guess is that they had a quick and ready answer and never dug into anything much. Am I correct? Well that is why they are wrong. If you actually paid them for a researched opinion letter you would find the results are not so certain. All of us know the spelling rule I mentioned above, "I before E." Whenever you spell something with an "I" and an "E" the rule is "I before E." That works perfectly for "wield," "field," and "shield." If someone were to ask you, "does the "I" come first in a word or does the "E" come first?" you would immediately think, "I before E." I know there are some of you out there that are screaming to yourselves about what a moron I am. You are saying, "That's not all there is. There is a second half to the rule." Well, what if the second half of the rule was never taught? Everyone would think the first half was all there was and would never question it when asked how to spell "nieghbor" and "wiegh." the "I" would go first. Of course this is wrong. The rule goes on to say, "I before E except after C or sounding like A as in neighbor and weigh." The "appreciated asset" rule is the same. All appreciated assets are treated as ordinary income UNLESS they are currency, currency contracts, or inventories. The problem is that the professional community generally does not know about the last part of the rule. Then - when asked to look deeper, they find publication 525 pg. 33 (or even better yet the law - section 988 (e )(2 )) and stop there because it says "for a personal transaction it is ordinary income." However, this lack of thoroughness leads to an improper conclusion. The parts being missed are key and vital to the analysis. No cursory examination of the code will unravel the mysteries here. You have to really dig in. If you stop at 988 (e )(2 ) or before, you will always come to the conclusion that any revaluation should be treated as capital gains. However, all you have to do is read the next subsection (988 (e )(3 )) to discount this hasty conclusion. That is where the conclusion is called into question and you have to start digging. Anyone researching this for a full opinion would have to go into the regulations and the legislative history to develop that opinion. This type of research makes it clear that the whole intent of the law is that if there is a transaction that has business or investment nature it is to be taxed as ORDINARY INCOME. If you need, I can post more about this analysis. For now I'd send a letter or make a phone call to your CPA and ask if they disagree with the assessment that they did not research their answers and to rely upon their opinion you would have to pay them and have them research before giving the opinion. It boils down to the fact that foreign currency is under completely different rules (section 988). Hope that is helpful, Best of Blessings, Mark OOps - one more thing : if it is a gift - the person who gave it will NOT be liable for the income taxes. The way it works is that when you give the gift, the person who receives it also takes your basis (how much you paid for it) and your holding period. If they sell it and realize an income over the amount of the basis they will have income and will have to pay taxes on the amount of that income. I'm sure that your CPA would agree wit that as well. Best of Blessings, Mark You have understood correctly. Cool Huh? Best of Blessings, Mark

If you hold the dinar inside the Roth you are in a wonderful position. Once there is a revaluation, simply instruct the IRA custodian to exchange the dinar. ALL GROWTH INSIDE THE ROTH IRA IS TAX FREE. However, depending on age, length of time you have had the Roth and whether you are taking payments as an annuity or in some other fashion there may be taxes and penalties levied against the funds when you remove them for your own use. It is not that you have to leave it all there; you just need to be careful about removing it. To emphasize the answer to your question. Doing the exchange inside the Roth has NO IMPACT ON TAXES. However, there may be tax consequences for early removal of assets from the IRA depending on circumstances. I hope that is helpful. Best of Blessings, Mark

You are welcome

Yes - it is called a Private Letter Ruling (PLR). These can be expensive to obtain and the IRS is not required to respond. However, if they do actually issue a PLR to an individual requesting it, that PLR is binding on the IRS for that person for those specific set of circumstances. No other person can use it and if the circumstances are not the same it is no longer binding. For more information on PLRs, go to the IRS website instructions on how they work: http://www.irs.gov/pub/irs-tege/rp2011_4.pdf The IRS could decide to make a Revenue Ruling of its own. These would apply to everyone. They may also simply give further guidance on an issue through a bulletin. I have submitted a request to the IRS for further guidance. A copy of it can be found on my blog here: http://whatisiraqidinar.com/sample-page Some people reading my request have told me that I am flip-flopping. That I tell you that it is ordinary income but then I tell the IRS that it should be capital gains. Well, I have done both but there is no inconsistency in that. Right now the IRS position is that you will pay Ordinary income. (In fact I have updated my analysis of that and list it on my blog site as well.) However, as long as I had the opportunity to make an argument in our favor I thought I should. There are some very big problems with looking at the income as ordinary income (especially in charitable planning) and I tried to point those out in my request to the IRS. Best of Blessings, Mark

First let me say that I appreciate your willingness to share and I want you to know that my response is in no way meant as a "slam" and it is not meant to be demeaning. These are confusing issues especially because they go against the general teachings each tax professional has received in relation to appreciated assets and professionals who do not specifically research give incorrect answers and are so sure of themselves that they don't feel the need to research. I was one of those professionals. It was only through the insistence of one of my friends/clients that I humbled myself and dug further into it. It was then I found out how wrong I had been. However, before that day if any of my other clients had called and asked me about it I would have told them the wrong answer and not had any reason to believe I needed to look further. I'll explain a little of how it works below. You have done the very best you can and relied on professionals whom you rightly feel you should be able to trust. However, in this case they are unfortunately wrong. This situation seems like it fits what they are trained to deal with. However, it has special rules that they are unaware of and will remain unaware of unless they specifically research it. It is not the type of answer that could be given out of the blue when someone calls you on the phone. In fact, when I first heard about it I had it wrong too. Since I began researching I have had the opportunity to speak with other attorneys and with CPAs who have studied the issues and also with attorneys and CPAs who have not studied the issues. Those who have not taken the time to study the issues almost always they are using the general rule for an appreciated asset. Some are even clever enough to think that it should be governed under Section 1256 like forex trading. Both are incorrect with regard to how the IRS currently views this type of transaction. Those I have spoken with who HAVE studied the issues generally agree with me. For instance, there is a tax attorney who regularly takes on the IRS in tax court. That is all he does. One day a client of his reported that "Dan Pilla said it is capital gains." I contacted Mr. Pilla and spoke with him briefly on the phone. After informing him what had been posted and that I didn't think that he would want his name associated with incorrect information, he gave me permission to respond to the post by telling people that he was called on the phone and gave on off the cuff response which he had not researched or been hired to give an opinion on. He was just thinking; appreciated asset = capital gains. He said (and I posted for him) that the answer he gave could not be relied upon and any reliable answer would require research. I have done that research. It is obvious to me that the tax attorney, whom your tax preparer called, made the same error as Dan Pilla. I have posted on this subject many times. I will extend to you the same offer I have given some others. If you wish for me to speak with any professionals upon whom you rely I will do it for free. I really would like to have better information floating around out there. Now lets deal with the IRS call. Calling the IRS is worthless - the phone reps are not trained on section 988 and foreign currency transactions are on their list of things "they are not supposed to answer" questions over. However, they often do not refer to their list of "don't answer questions about these things." When an IRS phone rep does a search for you, they come up with the same publication 525 discussed in many of my other posts and "assume" that what is listed on page 33 applies to you. Unfortunately it does not. However, they still end up giving out bad information over and over again. When I called the IRS I had a much better knowledge of things and was able to ask better questions. This led to them telling me that they could not answer. To read more about this read the following which I copied from a post I made on the Forbes Magazine website blog: To understand what the IRS really thinks, you need to talk with the correct people. As mentioned in some of my tax analysis posts, I have a friend who is a criminal investigator for the IRS. I asked her to help me find how the IRS would look at this issue and she forwarded a brief brake down of my analysis to an "International Examiner" who had been trained and has authority to make decisions regarding income on exchanges of dinar. The International Examiner" agreed with my analysis. To read the analysis (or print it for your tax professionals to look at) you can go here: The only big thing that my analysis leaves out is the legislative history. This indicates that the intent of the law governing foreign exchange gains and losses (Section 988) was to capture anything done for a business or investment purpose as ordinary income (35%). Having said that: Just because the IRS' current position is that our income should be treated as ordinary income (and reported as interest income), that does not mean that you could not disagree and fight the IRS on the issue. I believe there is a small space where an argument could be made for capital gains. However, my personal feeling is that the likelihood of winning any such contest is very slim. I did request further guidance from the IRS regarding these issues and am hopeful for a response. A copy of the IRS submission can be found here: I hope that is helpful. Best of Blessings, Mark A. Galloway, Esq. (Please see my profile for an abbreviated professional disclaimer.)

Hi, My name is Mark Galloway and I am an attorney. I am bringing the answer to this from the dinar tax blog I recently started. The full blog post can be read here: http://whatisiraqidinar.com/archives/14 . However, this should be enough to answer the question. I will apologize in advance if this post rains on anyone’s parade. I am an attorney and own Dinar. I have studied the tax implications of a revaluation fairly thoroughly and even counseled other attorneys and CPAs on these issues. One of them (a CPA) sent me a link to this post on another site and asked for my comments. It appears from the post that the author has confused the freedom from filing form 8938 with freedom from taxes. They are not the same. Here goes. To make this more understandable I am including quotes from the original post. No – bummer I know – but as bad as you wanted it to be true, I know in the back of your mind you still had doubts. Before I go on, I want to lay some ground work: Whether you believe it is Ordinary Income (like me) or capital gains, one thing that is very clear to all professionals who have studied this is that Section 988 of the Internal Revenue Code controls the taxation on our dinar. The code calls it “disposition of nonfunctional currency.” Disposition means getting rid of it and applies whether you are exchanging the dinar for another currency (like our own) or directly spending it. Non-functional currency for an individual is simply any currency from a country other than the U.S. For a business it could be a little more complex but not very. In other words – any gain or loss from getting rid of foreign currency is a section 988 transaction and is therefore governed under section 988. Listed below are examples from Treasury Regulation 1.988-1 (a )(6 ). (For illustrative purposes I have removed the currency listed in the regulation and replaced it with Iraqi Dinar.) Example 1. On January 1, 1989, X acquires 10,000 Iraqi dinar. On January 15, 1989, X uses the 10,000 Iraqi dinar to purchase inventory. The acquisition of the 10,000 Iraqi dinar is a section 988 transaction for purposes of establishing X’s basis in such Iraqi dinar. The disposition (disposition = spending) of the 10,000 Canadian dollars is a section 988 transaction pursuant to paragraph (a)(1) of this section. Example 2. On January 1, 1989, X acquires 10,000 Iraqi dinar. On January 15, 1989, X converts the 10,000 Iraqi dinar to U.S. dollars. The acquisition of the 10,000 Iraqi dinar is a section 988 transaction for purposes of establishing X’s basis in such Iraqi dinar. The conversion of the 10,000 Iraqi dinar to U.S. dollars is a section 988 transaction pursuant to paragraph (a)(1) of this section. These examples show that getting the Iraqi dinar was a section 988 transaction to establish basis (how much it cost you to get) and then disposing of it (whether spending it or exchanging for U.S. dollars) is also a section 988 transaction. (the above examples may be located here: ( http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_A,_Sec._1.988-1 ) This is not a correct statement. According to Treasury Regulation 1.988-2 (a )(2 )(ii )(B ) if you went to Iraq and used dinar to purchase something, the IRS will look at it as though you first exchanged to U.S. dollars and then used the dollars to purchase the thing. The following example in the regulation shows this. (It had a bargain sale component that I removed to keep from confusing people on the issue.) Example. G is a U.S. corporation with the U.S. dollar as its functional currency. On January 1, 1989, G enters into a contract to purchase a paper manufacturing machine for 10,000,000 British pounds (£) for delivery on January 1, 1991. On January 1, 1991, G exchanges £10,000,000 (which G purchased for $12,000,000) for the machine. On January 1, 1991, the spot exchange rate is £1 = $1.50. Under paragraph (a)(2)(ii)(B ) of this section, the transaction is treated as an exchange of £10,000,000 for $15,000,000 and [then] the purchase of the machine for $15,000,000. Accordingly, in computing G’s exchange gain of $3,000,000 on the disposition of the £10,000,000, the amount realized is $15,000,000. G’s basis in the machine is $15,000,000. If you didn’t quite follow that – the basis in the money (British pounds) was $12,000,000 and there was a gain of $3,000,000 because the exchange rate had gone up and the IRS looked at the transaction as though the £10,000,000 was exchanged for $15,000,000. ($15,000,000 – $12,000,000 cost basis = $3,000,000 gain.) In our situation our cost basis is much lower and the gains could be astronomical, but that is a good problem to have. It is true that the dollars you get have the same value as the dinar you dispose of. However, those dinar have appreciated. The IRS looks at your cost basis to determine just how much you have gained. In fact there is an example in the regulations showing a man trying to escape the Ordinary Tax treatment of that gain by taking his appreciated currency and placing it in a business and then selling the business (which would be capital gains). The IRS would not even allow him to get away with that. They will have their tax an as much of it as they feel they can legally get. See the example below: Example: B is an individual with the U.S. dollar as its functional currency. B holds 500,000 Swiss francs which have a basis of $100,000 and a fair market value of $400,000 as of October 15, 1989. On October 16, 1989, B transfers the 500,000 Swiss francs to a newly formed U.S. corporation, X, with the dollar as its functional currency. On October 16, 1989, B sells the stock of X for $400,000. Assume the transfer to X qualified for nonrecognition under section 351. Because the sale of the stock of X is a substitute for the disposition of an asset subject to section 988, the Commissioner may recharacterize the sale of the stock as a section 988 transaction. The same result would obtain if B transferred the Swiss francs to a partnership and then sold the partnership interest. (found in Treasury Regulation 1.988-1 (a )(10 )(iii ) http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_A,_Sec._1.988-1 .) I have removed the conversation because I don’t disagree with any of it. The agents answers are accurate. They just don’t matter. This conversation does not change anything relating to income tax on dinar. It only means we don’t have to file form 8938. I have already told people that on several occasions. You don’t have foreign assets when you hold dinar in the U.S. You have domestic assets (most likely purchased from a domestic currency dealer). The only thing that might qualify you for having to file form 8938 is if you have a VERY large Warka account (worth over $50,000 U.S.). Just because you don’t have to file one simple tax form does not mean you don’t have to pay taxes. They are completely separate issues. You also don’t file form 8938 when you sell a Ming Dynasty vase but you WILL be paying taxes on the gain. This post has taken me most of the day to get done as I could grab a moment. I hope it is not too disjointed or confusing. Best of Blessings, Mark

Hi, My name is Mark. I'm an attorney. The form 8938 is something that my colleagues have been discussing for months now and has nothing to do with the dinar. It was prepared in conjunction with the "tax amnesty" for those with foreign holdings that they were not reporting to the IRS like they are supposed to (i.e. Swiss Bank Accounts or land in a foreign country). Dinar that you hold in the U.S., (which was most likely purchased from a U.S. dealer) has been domesticated and is NOT a foreign asset. It his just like purchasing a vase from china. When it is in your home you no longer need to report it on the 8938, however, if you sell it you may have taxes to pay. (The tax rates for a vase and nonfunctional currency held for investment are different.) Best of Blessings, Mark

That is NOT a new idea and won't avoid taxation. According to Treasury Regulation 1.988-2 (a )(2 )(ii )(B ) if you went to Vegas and used dinar to purchase chips, the IRS will look at it as though you first exchanged to U.S. dollars and then used the dollars to purchase the chips. The following example in the regulation shows this. (It had a bargain sale component that I removed to keep from confusing people on the issue.) Example. G is a U.S. corporation with the U.S. dollar as its functional currency. On January 1, 1989, G enters into a contract to purchase a paper manufacturing machine for 10,000,000 British pounds (£) for delivery on January 1, 1991. On January 1, 1991, G exchanges £10,000,000 (which G purchased for $12,000,000) for the machine. On January 1, 1991, the spot exchange rate is £1 = $1.50. Under paragraph (a)(2)(ii)(B ) of this section, the transaction is treated as an exchange of £10,000,000 for $15,000,000 and [then] the purchase of the machine for $15,000,000. Accordingly, in computing G's exchange gain of $3,000,000 on the disposition of the £10,000,000, the amount realized is $15,000,000. G's basis in the machine is $15,000,000. Put in layman's terms. If you exchange for something, you have created a taxable event. Best of Blessings, Mark A. Galloway, Esq. (see my profile for an abbreviated professional disclaimer)

Do you have any idea how your post has been misinterpreted???? I received no fewer than 4 emails last night and today where your original post is quoted and they are claiming that it means no income tax for dinar investors. Don't know how it happened but that is the danger of being proactive. I corrected all whom I could. Thanks for the post and thanks for the excitement. Best of Blessings, Mark

The 8938 has been around for a few months. My fellow estate planning attorneys and I have had many discussions about it because it deals with the tax amnesty for people reporting their foreign assets. You do not have any foreign assets or accounts. You have domestic assets purchased from a domestic supplier. The fact that they originated in a foreign jurisdiction does not matter. Best of Blessings, Mark A. Galloway, Esq.

You will not have to pay SE tax on this because it is not an operating business. Even if you set up an LLC for asset protection and place the dinar in it you will not have to pay the SE tax because it is not an operating business (or if it is the dinar is not related to the operations). So - you don't have to worry about the SE tax - however you will have Federal and state taxes. IMPORTANT NOTE IF you have state income tax you really should pay the taxes on any dinar income as ESTIMATED TAX PAYMENTS in the year earned so that you can deduct them on your federal taxes. It will save you 35% of the amount paid on state Income taxes.

I see this over and over again. I'm sure that your accountant is very knowledgeable and I think you should continue to trust him. However, based on your numbers, I am afraid that he is thinking about the income under section 1256 where most foreign exchange income is recognized. Unfortunately we are not able to use section 1256 and our income is governed under section 988 alone. I would be happy to speak with your accountant/CPA regarding these issues. Just leave a message on my profile with how to get hold of you. I have counseled CPA's and tax attorneys on these issues. All of those whom I have spoken with who have studied the issues agree with me on the tax issues. There is language in section 988 (e ) that leaves a little bit of wiggle room for someone to "claim" capital gains treatment (which would be 15%), but it is clear from the regulations and legislative history that the IRS would disagree. Best of Blessings, Mark A. Galloway, Esq. The issues here are 1) first of all you can not depend on IRS numbered publications. They are not the law and do not carry ANY weight whatsoever in tax court or even with the IRS. (The same goes for telephone and email responses to questions.) 2) Even if you could rely on Publication 525 Pg. 33 which states exactly what you said, it doesn't matter because the IRS will claim what you have is NOT A PERSONAL foreign currency TRANSACTION. The language in the publication is actually almost a direct quote from the law in section 988 (e ). However, the very next subsection narrowly defines the term "Personal Transaction" in a way that is not intended to include any income derived from a business or investment purpose. The "Personal Transaction" exception is very nice for people who travel to foreign countries, however, it does not apply to we foreign currency investors. Best of Blessings, Mark I'm sure your accountant is brilliant. I also know of a tax attorney who's regular practice is going up against the IRS. He told his client the same thing. However, when I called and spoke with him he changed his tune. Tax professionals are generally trained that any appreciated asset gets capital gains treatment. That is exactly what I thought too before I began researching it. After I spoke with the tax attorney he realized he had just given an "off the cuff" answer without looking into the special rules that apply to income from disposition of nonfunctional currency. If your accountant would like to talk, I'd be happy to. Best of Blessings, Mark I'm sure that if your CFO/accountant had taken the time to research the issue he/she would have told you differently. It is precisely because it is physical currency that it is governed by section 988. If it were a currency contract then we could opt out to section 1256, but it is not. This is a very basic issue that is easy to spot. Just tell them an attorney (me) told you that it IS governed under section 988 and have them check the special rules in that section with regard to disposition of nonfunctional currency. It is clearly defined as a "Section 988 Transaction." I hate to seem like I am harping on people. That is not my intention. I just don't want to sit by while so much incorrect information is being disseminated when it is so easy for me to fix it. I hope this is helpful. Best of Blessings, Mark

The IRS would be very hard pressed to say that you had any investment intent in the way you acquired your dinar (as a gift). The real question is how far do they want to push the issue. When I had a friend of mine at the IRS check with an International Examiner that she works with we all agreed that a gift of foreign currency could only be taxed as capital gains. However, since that time I have done more study that causes me concern enough that if I had a client claiming capital gains I'd at least warn them. Let me try to brake it down as simply as I can. The way the law is written and the purpose (intention) of the law don't necessarily match up. INTENT OF THE LAW The intent of the law as shown by the regulations and legislative history is to capture everything that is of a business nature or investment nature and charge ORDINARY INCOME. LANGUAGE OF THE LAW The way they try to capture that intention is by saying: 1) Income from disposition of nonfunctional currency is Ordinary Income (translated it means that income from exchanging or spending foreign currency would be ordinary income) 2) If you are simply traveling or have other "Personal Transactions" they cut you a brake and say you can claim CAPITAL GAINS treatment for income. 3) If you have section 212 or section 162 deductions (that is investment or business deductions) relating to the currency then you can not claim that it is merely a "Personal Transaction." You don't get the exception and you still have to pay taxes as ORDINARY INCOME. Number 3 is where all the confusion lies. We know what the IRS' intentions are. However, the way the law is written is very ambiguous. They may try to interpret it in such a way as to claim that any transaction where a section 212 deduction "could have been claimed" still qualifies your income as ORDINARY INCOME. If they do this then it is possible that even dinar income received as a gift might not escape the claim. I want you to understand that is stretching it quite a bit, but I would not put it past the IRS to attempt it. IF I WERE IN YOUR SHOES In your circumstances you have the best claim possible to Capital Gains. I'd take it. If the IRS challenged it I'd fight them tooth and nail and I think you have a good chance of prevailing in Federal Tax Court. My personal opinion is that the IRS may try to claim that it is Ordinary Income but if they do I think they would lose in Court. I hope that is helpful and not too confusing. Best of Blessings, Mark

On my listserve we have been discussing form 8938 and the reporting requirements for quite a while now. I still have access to a webinar on the topic. However, I never thought to mention it to my fellow dinarians. Why, you ask? Because it does not apply to most of us. The purpose of the form and the law behind it is to better capture those assets people are HOLDING IN FOREIGN COUNTRIES. Most of us are holding our assets in the U.S. and even purchased them from a U.S. dealer. Unless you have a Warka account or other substantial holdings outside of the U.S., you should not worry about that form. It does not affect your Dinar holdings in the U.S. You are not holding foreign assets. You are holding U.S. domesticated assets that you just happened to originate from a foreign country. Best of Blessings, Mark

In Response to AND Allow me to introduce myself. My name is Mark and I am an Estate Planning attorney. I have been studying and consulting on issues dealing with the taxation and asset protection of the Dinar for some time and believe that I may have some minor insights to provide on this topic. I won't get into the technical details here. If you want those I have other posts including the submission I made to the IRS that are other places on the forum. Professionals sometimes will give an "off the cuff" answer of capital gains treatment for any income associated with this investment. That is because we are taught to think "Appreciated Asset = Capital Gains." However, those of us who have studied the law, the underlying regulations, and the legislative history believe that it is fairly clear that the current IRS' position (and it seems congresses' intent) was to charge ordinary income taxes to anyone who has a foreign currency transaction that is in the nature of an investment or business activity. (That means us.) However, the way the law is written currently, there is a little wiggle room to contest that it will not apply to most of us (unless you claimed deductions under section 212 or 162 related to your dinar investment). However, since the IRS does not agree, it would take a battle in Tax Court to find out if we could win with that contention. There are no guarantees someone taking this to court could win. RECAP The IRS' position is that this is ordinary income. In fact they say to treat it (and report it) as interest income. There MAY be a loophole through which to contest the IRS' position as it applies to us but there is a only a slight chance of any success doing this. As I mentioned briefly above, I have submitted a request for guidance to the IRS. They have agreed to add section 988 (the law governing all of this) to their guidance list for this year. However, we don't know if it is in response to my request or the request of someone else. Their guidance could be in relation to a completely different are of section 988 and ignore us entirely. They have until June 31 2012 to give whatever guidance they will give. We can only hope that clearer guidance will be given. Hope this is helpful. Best of Blessings, Mark

My suggestion would be to use either an LLC or a Limited Partnership (LP) with an LLC or C Corp serving as the general partner. These structures have advantages over the S Corp for flexibility and asset protection. They also have advantages over the C Corp in flexibility and tax savings. Best of Blessings, Mark

For those of you who do not yet know me, my name is Mark. I'm an estate planning attorney. On my listserve we have been discussing form 8939 and the reporting requirements for quite a while now. I even have access to a webinar on the topic. However, I never thought to mention it to my fellow dinarians. Why, you ask? Because it does not apply to most of us. The purpose of the form and the law behind it is to better capture those assets people are HOLDING IN FOREIGN COUNTRIES. Most of us are holding our assets in the U.S. and even purchased them from a U.S. dealer. Unless you have a Warka account or other substantial holdings outside of the U.S., you should not worry about that form. It does not affect your Dinar holdings in the U.S. You are not holding foreign assets. You are holding U.S. domesticated assets that you just happened to originate from a foreign country. Best of Blessings, Mark

For those of you who do not yet know me, my name is Mark. I'm an estate planning attorney. On my listserve we have been discussing form 8939 and the reporting requirements for quite a while now. I even have access to a webinar on the topic. However, I never thought to mention it to my fellow dinarians. Why, you ask? Because it does not apply to most of us. The purpose of the form and the law behind it is to better capture those assets people are HOLDING IN FOREIGN COUNTRIES. Most of us are holding our assets in the U.S. and even purchased them from a U.S. dealer. Unless you have a Warka account or other substantial holdings outside of the U.S., you should not worry about that form. It does not affect your Dinar holdings in the U.S. You are not holding foreign assets. You are holding U.S. domesticated assets that you just happened to originate from a foreign country. Best of Blessings, Mark Hi-Five posted: Following that unirod said: Unirod - that makes me wonder what you think your LLC will do for you. I know there has been a lot of incorrect information floating around about being able to avoid taxes with an LLC. If that is what you were thinking, that information was not portrayed in a clear way and is misleading. Simply having an LLC does not give you many tax advantages with relation to a foreign currency investment income. If you would like to discuss this further, I'd be happy to. I'd like to make sure people have correct information. Best of Blessings, Mark

The purpose of the form and the law behind it is to better capture those assets people are HOLDING IN FOREIGN COUNTRIES. Most of us are holding our assets in the U.S. and even purchased them from a U.S. dealer. Unless you have a Warka account or other substantial holdings outside of the U.S., your accountant probably never should have worried you with that form. It does not affect your Dinar holdings in the U.S. You are not holding foreign assets. You are holding U.S. domesticated assets that you just happened to originate from a foreign country. Best of Blessings, Mark