ExecConsult

In reference to my post above, I found my old post about the call I made to the IRS: "I spoke with the Mr. Colbert ID# 1000220899. He was aware of section 988 controlling the issue. However, 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." Best of Blessings, Mark

In reference to my post above, I found my notes on the call I made. "I spoke with the Mr. Colbert ID# 1000220899. He was aware of section 988 controlling the issue. However, 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." Best of Blessings, Mark

Gifting does not have to be with family. However, gifting does not avoid income taxes. There are two different types of taxes being discussed here; income tax and gift tax. If you are careful you can make gifts while avoiding gift taxes. However, income taxes will still apply to someone (whoever gets income). If I give you 500,000 dinar today it is only worth about $500. Therefore, I'd owe no tax on the gift I made. However, when you receive the dinar with a "basis" of $500 and turn around and exchange it for$1.5 million later, YOU will have income so YOU will have to pay taxes on that income. I hope that helps you understand things a little bit better. Best of blessings, Mark

I just realized that I never answered your initial question -- Two things - 1) The most important reason is so that people don't make decision based on incomplete or incorrect information and then get burned. It is much better to hear it from me now then to hear it from an auditor later. 2) The "IRS Itself" does NOT say that our investment should be taxed as capital gains. The only place that anything is said about taxing foreign currency transactions as capital gains is that one exception to the rule which is repeated in Pub. 525. Just because that is what a bunch of untrained phone bank operators look up Pub 525 and repeat it over and over again does not make this the official position of the IRS. The IRS people who actually make decisions about this stuff that I have heard from agree that Pub. 525 does not apply to us. It was written for travelers who exchange currency for the purposes of their travel and other incidental personal reasons (NOT business and investment reasons). Best of Blessings, Mark

I take no offense at your post. I can see that you are trying to understand this and I can see why you would feel the way that you do. I'll do my best to address your comments clearly and succinctly. Issue - Sale of asset -- Your money is an asset. Interest earned on that money is also an asset. The IRS would refer to your IQD as "nonfunctional currency" because it is money but not the money you can normally do business with in your country of residence. Still, the IRS sees it as money. When you exchange it for other money (whether foreign or domestic) they don't look at it as a "sale" of your money. They look at it as an appreciation of your money; like interest. Under section 988 it states the following: Section 988 (a )(2 ) "To the extent provided in regulations, any amount treated as ordinary income or loss under paragraph (1) shall be treated as interest income or expense (as the case may be). " Issue - No direct IRS code -- Above you said If I ever gave the impression that is what I believed, I communicated terribly. My apologies. I believe the reverse is closer to the truth. Section 988 as a whole provides that income and loss from currency exchanges should be reported as ordinary income. It is only under specific exceptions where people get to deviate from this proposition. Section 988 (a )(1 ) states: "Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be)." Within the actual law and supporting regulations the overwhelming weight is for the prospect that currency exchanges are in fact ordinary income. So why is there any argument and why do we so "MUCH" to say that it is Capital Gains? I'll answer that as well. Argument amongst professionals - All of the professionals with whom I have communicated directly agree that the IRS' position is that this is ordinary income. My most recent communication was with Robert A. Green, the CPA who did the following Forbes article: http://www.forbes.com/sites/greatspeculations/2011/07/27/is-the-iraqi-dinar-worthless-paper-or-maker-of-millionaires/ . I also had email communication with the tax attorney with whom Mr. Green worked prior to writing the piece. I have run across a few instances where a CPA will say they think it is Capital Gains on the forum, but very few. The only argument is whether or not this personal exception mentioned in publication 525 pg. 33 actually applies to those who have purchased dinar as an investment. The entire thing hinges on one tiny phrase, “expenses properly allocable to such transaction meet the requirements of.” Among professionals this is the pin upon which all analysis hinges. So MUCH to say capital gains - The only "so MUCH" out there is the fact that the same thing gets repeated over and over again. The exception to the rule that is quoted in publication 525. It all leads back to that. I discuss this more in the link listed below. I firmly believe that an analysis of the law, regulations, and legislative history indicate that the IRS' current position is that any income derived from foreign currency purchase with a business or investment intent will be taxed as ordinary income. However, in my submission to the IRS I argue the other side of the coin and suggest that it is not appropriate to attempt to tax the income as ordinary income unless the person has actually claimed a deduction for a business or investment expense related to the foreign currency. A post containing this submission can be found here: I am not going to attempt to take the time to address everything in this post. I will only address what I feel is most critical for people to understand. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Gridkeeper - and those of you who are relying on his posted information; please read this. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. First I want to say that I can tell that Gridkeeper has put time and effort into understanding this stuff and he truly wishes to help people. For that he gets a + from me. I am not going to attempt to take the time to address everything in this post. I will only address what I feel is most critical for people to understand when reading Linny's post. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Linny - and those of you who are relying on his posted information; please read this. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. First I want to say that I can tell that Linny has put in a tremendous amount of time and effort and he truly wishes to help people. For that he gets a + from me. I am not going to attempt to take the time to address everything in this post. I will only address what I feel is most critical for people to understand when reading Linny's post. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

I thought that I had already replied to this message but I can't find it. If it comes up as a double post I apologize. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Linny - and those of you who are relying on his posted information; please read this. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. First I want to say that I can tell that Linny has put in a tremendous amount of time and effort and he truly wishes to help people. For that he gets a + from me. I am not going to attempt to take the time to address everything in this post. I will only address what I feel is most critical for people to understand when reading Linny's post. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Linny - and those of you who are relying on his posted information; please read this. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Those of you who are relying on his posted information; please read this. Hi, This is Mark. A lot of you who follow the tax forums know me. For those of you who don't, I'm an estate planning attorney and I have put a lot of time into the tax issues relating to dinar. This "Call to the IRS" was discussed over and over a while back. I did a post some time back on this issue. I want to be sure people have the best information I can provide in their decision making processes. I hope that no one feels I am bashing them. I am just going to spell things out and give people the best information I can. When this came up the first time, I wanted to illustrate a point so I called the IRS myself and spoke with a gentleman in the "Complex Individual Issues" department. When I began telling him the issue, he stopped me and told me that that they were not supposed to answer questions regarding gains on foreign currency exchanges. I told him I was an attorney and told him what Mr. Kirk had said. His response was that they have a list of items they are not supposed to attempt to answer. Foreign currency transactions are on the list. They are considered "outside the scope" of their department. He went on to tell me that it was unfortunate that most of the people did not refer to that list before trying to answer the questions. Previous to this phone call, I also tried to use their email Q&A service and got the same "outside the scope" response. So basically Mr. Kirk has not been trained to appropriately address these issues, is not supposed to be answering these questions for which he is not qualified, and can not be relied upon. I can hear a lot of you now saying that I am being too harsh and that just because he was not officially supposed to answer, he certainly knew what he was talking about and had the documents to back him up. Lets discuss that next. IRS Publications are NOT the LAW Over and over again, Publication 525 Pg. 33 is quoted as definitive proof that our investment will be taxed as capital gains. On the surface it certainly seems like an open and shut case. However, nothing is EVER that easy with the IRS. IRS publications are not binding on the Service. They are printed to give help and guidance. Tax professionals have known (or should have known this for a long time. Note the following from a case back in 1978. "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 peril." [emphasis added] Caterpillar Tractor Co. v. United States, 589 F.2d 1040, 1043, 218 Ct. Cl. 517 (1978) This is what the IRS has to say about the quality of the information they put out to help you: This guidance should be used to ensure and maximize the quality of disseminated information. The Internal Revenue Service’s guidelines are based on the Office of Management and Budget (OMB) guidelines published in the Federal Register on September 28, 2001, January 3, 2002, and February 22, 2002. These guidelines, as the name suggests, are in the nature of guidance. They are not intended to be, and should not be construed as, legally binding regulations or mandates. They are not legally enforceable and do not create any legal rights or impose any legally binding requirements or obligations on the agency. Nothing in these guidelines affects any otherwise available judicial review of agency action. So, you see -- as important as the "Complex Individual Issues" department sounds, it is just a little higher level of the call center in the customer service department. Not only are they not trained or qualified to answer the questions about foreign currency transactions, if they do, you can not rely on what they told you. The IRS doesn't care. What the customer service department employees tell you does not matter. Section 988 is the LAW The taxes for profits and losses from foreign currency transactions are controlled by Section 988 of the Internal Revenue Code. (What publication 550 refers to is the ability to "opt out" of 988 control to Section 1256 for foreign currency "contracts." This doesn't apply to us because we are not purchasing forex contracts.) What is found in publication 525 on page 33 is, in fact, mostly a quote from section 988. However, it is only a quote for an exception written into the law for people who do foreign currency exchanges for personal purposes like travel. What the publication fails to point out is that the very next subsection in the actual LAW gives a very limiting definition of what can be considered a "personal transaction" to be able to take advantage of the exception to the rule. My analysis of the law after research and consulting with IRS tax professionals and private tax professionals is that as of today, the IRS' position is that anything done with a business or investment purpose/intent will not qualify for this "personal transaction" exception to the rule. Therefore, they will be taxed at ordinary income levels instead of as capital gains. I made a more complete post of my analysis. It can be found here: Is this final? Well . . . not really. I do believe that it is fairly difficult to overcome. However, the IRS has not addressed one phrase in the law very directly and it "could" give someone wiggle room to at least attempt to claim capital gains treatment. However, I believe to do so invites a guaranteed audit and I believe you will most likely lose. Still, I am an attorney and though we council our clients one way, we may argue on the client's behalf another. I did a submission to the IRS requesting guidance where I argued for capital gains treatment. I did a post on it which can be found here: I hope you find this to be helpful. Best of Blessings, Mark P.S. See my profile for a shortened professional disclaimer

Sorry this is so late in coming. You can find a fairly simple article on the matter here: http://taxes.about.com/od/preparingyourtaxes/a/TDF90221.htm Then you can find the actual forma and instructions from the IRS here: http://www.irs.gov/pub/irs-pdf/f90221.pdf These two links should be able to answer any questions that have not already been answered. Summary breaking it down - you need to report all foreign accounts which have an asset value in excess of $10,000 any time during the year. You will report any income on those accounts on your 1040 based on the nature of the income. Interest income is reported on Schedule B. Best of Blessings, Mark

Short Answer NO - you will not be taxed every year on income from an RV Longer Answer You are taxed each year on what you earned in the year. You have income from the RV when you make an exchange IQD into USD (or anything else of value). If you exchange it all in one year, you will pay your taxes for the income for that year. Hope that is helpful. Best of Blessings, Mark

I have also had good luck referring people to NAFEP (its an IRA company). They will hold the dinar in their vaults. Entrust requires you to find a third party custodian to hold the dinar - they won't. Best of Blessings, Mark

Short Answer No - you will not be taxed every year on income from the RV. Longer Answer You are taxed each year only on what you earn in that year. So, if there is a revaluation at $3.00 and you hold 1,000,000 IQD, do you have any tax? NO! - not until you exchange and realize the profit. It is the same with stocks, if a stock goes up it does not cause income. You only realize the income (or loss) upon sale. So - RV in 2011 and you exchange 500,000 IQD at a profit of $1.5 million, you will be taxed on the $1.5 million. If you exchange the rest of it in 2012, then in 2012 you will be taxed on the income from that exchange. If you exchange the whole thing and realize a $3,000,000 profit in 2011, you will be taxed on that amount. Then you will reinvest you the remainder and each year you will pay taxes on whatever income those investments bring. I hope that is helpful. Best of Blessings, Mark

It's true that the LLC is good to own stuff. However, when you sell, if you have an income, you must pay taxes on that income regardless of whether you sell the assets out of the LLC or you sell the LLC interests. In fact, with regard to foreign currency, the IRS has an example in the regulations where someone places foreign currency in a business entity. The foreign currency has appreciated about $300,000. Since any exchange gains would be at ordinary income levels, instead of exchanging the currency the individual sold the stock in the company hoping to get capital gains treatment for the income. The IRS came in and said since the value of the company was based on the appreciation of the foreign currency, capital gains would not be allowed and they reclassified the income as ordinary income. Anyway, whether you sell the assets or sell the LLC, any income triggers tax. Best of Blessings, Mark You made me smile. Anyone who wants to pay me $400/hour for what I have done here is certainly not going to be refused. However, I usually ONLY charge $250/hour. Anyway, you are most welcome. You can not take current dinar and place it into a Roth IRA. You must fund the Roth with US dollars and then instruct the IRA custodian to use the funds to purchase new dinar. To accomplish this you must have a self-directed Roth IRA and an IRA custodian who is willing to purchase and hold dinar as an investment. There are many companies out there. When DinarTrade was still up and running, they had a relationship with Entrust. However, Entrust would not hold the dinar once purchased and people had to use a third party company to hold the dinar. I have been referring anyone who asks over to NAFEP. They are an IRA company set up to hold hard assets in IRA. They will hold dinar in their gold vaults. I hope that is helpful. Best of Blessings, Mark

WooHOoo!! (I hope.) I was Just informed by the attorney who convinced me to do the IRS submission to begin with. The IRS has published their Priority Guidance Plan and Section 988 is now on the plan. Before we get too excited, it is unclear if they will address the issues regarding section 988 which we need them too, but I am hopeful that this is in response (at least partially) to my submission and we will get the guidance and direction we need. WHAT THIS MEANS? There are a total of 317 projects the IRS has decided are priorities for giving guidance on for July 2011 through June 2012. Section 988 is one of the 317 projects. Now we have to wait and see if the guidance they give for section 988 is of any real help to Dinar investors. Best of Blessings, Mark

The law that controls foreign currency transactions is Section 988 of the Internal Revenue Code. The regulations promulgated by the IRS supporting that section specifically indicate that exchanging one foreign currency for another foreign currency is NOT a "like kind exchange" and would, therefore, trigger income. Best of Blessings, Mark P.S. See my profile for an abbreviated professional disclaimer.

I am not aware of any form that will go to the IRS. However, there still could be one that is planned. I guess the real question is, "What impact would it have on us if there were such a form?" The impact would be that you don't have to wonder if there will be an audit of your return. It is intersting to note that this year was the first year that the adoption credit has been a refundable credit. What did the IRS do? They audited every single return claiming an adoption credit. I'm betting next year they may set a criteria to audit every return that has over X amount of capital gains or interest income. We all get audited anyway. Best of Blessings, Mark

Just like in criminal cases, in IRS cases there is something referred to as a "statute of limitations." This means that a person typically does not have to worry about the IRS being able to come after them for anything more than three years old unless you have defrauded the IRS. After three years they can not audit you, assess a tax, or start a court proceeding. Here is a fairly concise list of IRS statute of limitations for assessing a tax for past years: Statute of Limitations for IRS Assessments General Rule - The IRS is required to assess tax within 3 (three) years after the return was filed. See section 6501(a ) of the Code and section 301.6501(a )-1(a ) of the regulations. Similarly, no proceeding in court without assessment for the collection of any tax can begin after the expiration of 3 years. See section 301.6501(a)-1(B ) of the regulations. The statute of limitations is 6 (six) years if the taxpayer omits additional gross income in excess of 25% of the amount of gross income stated in the tax return. See section 6501(e) of the Code and section 301.6501(e)-1 of the regulations. The statue of limitations does not apply to tax returns prepared by the IRS under the authority of section 6020(B ) of the Code. See section 6501(B )(3) of the Code and section 301.6501(B )-1(c ) of the regulations. The statute of limitations does not apply in the case of a false or fraudulent return with intent to evade any tax. See section 6501(c )(1) of the Code and section 301.6501(c )-1 of the regulations. The above list was prepared by a different attorney. It can be found here: http://www.irstaxattorney.com/statute.html Hope that helps. Best of Blessings, Mark

I know this idea is floating around. In fact, I once did a post saying the same thing. (That's what I get for listening to another attorney without thinking about it myself.) However, that is not the way it works. LLCs are typically taxed as "flow through" entities. This means that the LLC is not ever directly taxed. You are the one who is taxed and you will pay both federal and state taxes on all of your income (including all of the LLC income that flowed through to you). The only way out of this is to elect to have the LLC taxed as a C corp. However, this is not a good idea for most of us. If you choose to have the LLC taxed as a C-Corp, the LLC is taxed directly. If it is set up in a state that does not have state income tax then it will avoid state income tax. However, you still have no money. What do you do to get money. You have to have the corporation pay you. When you receive that payment it is NOT a gift. It is Income that you will be taxed on. Again you will pay both federal and state income taxes. So you have one chunk of money - the LLC gets taxed on it, then you get taxed on it again when you take some out. This is what they call double taxation. It is better in most circumstances to use the flow through entity and pay your state income taxes. However, there is a way to save a little on those taxes. If you have state income taxes, you can pay them as estimated taxes in the year you have the income and deduct the payment from your federal taxes when filed. For instance, lets assume an RV in September. You exchange and have $1,000,000 in profit. You live in CA and owe 100,000 in state income taxes. You pay estimated taxes in December of $100,000. Now the year 2012 comes around and you have to file federal and state taxes for 2011. When you file your federal return you can deduct the state taxes paid in 2011 against your income from 2011. It should save you $35,000. When you file your state taxes, you have already paid what you owe so state taxes are not impacted. Hope this is helpful. Best of Blessings, Mark

The reason is actually fairly simple. You are allowed to opt out of section 988 treatment for section 1256 on forex contracts. This only applies to contracts. Instead of holding a forex contract, each of us holds physical currency. If you trade in dinar spot or futures contracts later on it would apply. However, it does not apply to holding the physical currency. Best of Blessings, Mark I go into a little more involved explanation of this in the following linked post.

Allow me to introduce myself. My name is Mark Galloway. I am an estate planning attorney. See my profile for an abbreviated professional disclaimer. Here is a link on how the taxes break down - I wrote the above information - I'll summarize it here: Section 988 of the Internal Revenue code is what controls the taxes on this issue. It is clear to me from study of the code, the underlying regulations (and more recently the legislative history) that the IRS' view on this currently is that if you exhibit business or investment intent, any gains are to be taxed as ordinary income. In fact, Section 988 says we are to report it as "interest income." The tax is due in the year it is realized. So if you exchange in 2011 and have gains, when you file your 2011 taxes on April 15 of 2012, the taxes will include the exchange gains from the dinar just as it would include any income from your job or interest income from a bank account. (I'll mention the thing about $200 below.) This is true, but if you exchange dinar for USD, I'm betting your income will be above $69,000. Also, as I have mentioned above, the IRS does not currently view this as capital gains in most of our circumstances because we got the dinar as an investment. You should expect to be paying about 35% on all earnings. I have seen attorneys and CPAs differ on this, but there are only 2 basic answers: Ordinary Income OR Capital Gains. Typically, the attorneys/CPAs saying capital gains have not dug into the matter. We are trained that appreciated assets are capital gains. However, most of us are not trained that currency exchanges can have their own special rules. I started researching because I was trying to show a friend that their banker's attorney was wrong - I had to eat humble pie. The attorneys/CPAs I have read of who claim to have researched this (with the exception of one) say it is taxed as ordinary income. The ambiguity (and thus the argument) comes from one tiny line in Section 988 that is not defined clearly enough. So, am I saying there is room for argument? Yes. I actually did another post which argues against what I feel the current IRS position is. Each year the IRS invites the public to make recommendations for things the IRS should give more guidance on. They call it the "Guidance Priority List." I made a submission to the IRS requesting guidance on this very issue. However, in my submission I argue that a capital gains standard should be used. The entire piece can be found here: So where does this $200 and capital gains come from? If it's not the answer why does it keep cropping up? The IRS publication 525 on page 33 paraphrases a tiny piece from section 988. It says that for a "personal foreign currency transaction" any gains are to be reported as capital gains if they exceed $200 and any losses are not able to be reported. The problem that most people don't realize is that the language "personal transaction" is very limited and very narrowly defined. This is an EXCEPTION to the rule that was carved out for people who are doing currency exchanges for personal reasons like traveling. Again, this is the exception - the rule is to tax currency exchange gains as ordinary income. What you mention here is called a "Private Letter Ruling." I am sure that if the IRS does not issue further guidance subsequent to any revaluation, there will be a lot of people seeking a PLR. You can either go that rout or you have two other choices, claim capital gains and put money away in case the IRS disagrees with you. You can then use that money to either fight them in tax court or to just pay the additional taxes assessed. If you make it for three years without a disagreement you should be fine to use the money you set back. The only way they open up records more than three years back is if they can show fraud (make sure you don't commit fraud). Your other option is to simply pay the ordinary income amount. Then if there is sufficient guidance later showing there should have been capital gains treatment, you can file an amended return requesting a refund. While this may not be appealing for purposes of the difficulty in getting money back from the IRS, the appeal that it does have is that you never have to look over your shoulder - EVER. I hope this is helpful. Best of Blessings, Mark

Bless you Adam - you are the first person ever to think of me as mature enough to be called a "codger." Agreed - not one size fits all - can get around age requirement if you annuitize the payment stream (payments come out in substantially similar payments). You also have the 5 year rule for waiting for 5 years from the initial funding until you can get at it. Still even if you violate the 5 year rule, the numbers are pretty favorable. It is a good thing to look at but, as with all advice you read here, discuss it with a competent adviser in relation to your own circumstances before acting. Best of Blessings, Mark