Spent almost 2 hours with my CPA yesterday

[carolina.broker]

Well I spent almost two hours with my CPA yesterday (corporate returns were due yesterday) and I have some interesting news...

First... my CPA could not find any tax code (note I said actual code, not from a blog or publication on the internet) that addresses owning hard currency and exchanging it for another. IT DOESN'T EXIST!!

Two... windfall taxes have been around for decades and were designed to penalize the oil and utility companies when they were making obscene profits. There is NO bill pending that would tax individuals 70% of their investment.

Now... it doesn't mean that they may not try and close this loop hole somehow... but here lies the problem. Right now Dems are joining Republicans and placing pressure on the White Hose to keep all the Bush cuts in place. Do you really think they're going to pass a new tax on individual investors in this political arena? Probably not... but we must keep a very close eye on congress and what they're doing.

Here is the entire tax code for your reading pleasure... http://www.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26.html I have already spent the good bit of 3 1/2 hours pouring through it. This site by the way is through the Internal Revenue Service.

One more important note... Everything above is the treasury level. Individual states also have special tax laws you need to be aware of. Understand your state tax laws before doing anything as well.

I am going to post this in the regular forum so everyone has access to this.

[ReturnToGod]

Very encouraging; thanks for the post!

[Butifldrm]

Thanks for the Post!

[layadooganlazy]

So where does the 35% tax comes from?

Thanks for the post.

Edited September 16, 2010 by layadooganlazy

[rsneed]

So, are you saying your CPA told you that we will not be taxed on our earnings from exchanging the IQD into USD?......

While I feel that is very doubtful, that would be nice..............

[RAB42]

Thanks for the post, very helpful...

[MrRich]

Well I spent almost two hours with my CPA yesterday (corporate returns were due yesterday) and I have some interesting news...

First... my CPA could not find any tax code (note I said actual code, not from a blog or publication on the internet) that addresses owning hard currency and exchanging it for another. IT DOESN'T EXIST!!

Assuming he's right, how many people are going to exchange one hard currency for another? I mean, if the dinar RVs at $1 are you going to take in hundreds of thousands of dinar and leave the bank with hundreds of thousands in cash?

[PAPATOM]

35% is a capital gains tax. you need to have a capital gain in order to pay this. it is scheduled to go up to like 39% next year.

while i don't want to doubt a cpa....i'd really love to believe them......I don't understand how someone could move say even 2 million dollars into an account and not pay taxes on it because he says, "i just turned in some currency I had laying around".......if you did get that past, you'd have a heck of a fight and spend a lot of money proving that it wasn't an investment you made......"intent"......and investments are charged capital gains taxes. If i was trading in a couple thousand, or even 500k dinar I might be able to say it wasn't an investment, but left over from a trip....if i had taken a trip. for me....the truth is it is an investment so it's gain is going to get taxed....and i'll pay that tax and be grateful for the gain and for the provision. thank you LORD! go R.I !!!!

[brookie]

thanks for the post and the time spent on the read it could not have been fun reading tax code!

[carolina.broker]

35% is a capital gains tax. you need to have a capital gain in order to pay this. it is scheduled to go up to like 39% next year.

while i don't want to doubt a cpa....i'd really love to believe them......I don't understand how someone could move say even 2 million dollars into an account and not pay taxes on it because he says, "i just turned in some currency I had laying around".......if you did get that past, you'd have a heck of a fight and spend a lot of money proving that it wasn't an investment you made......"intent"......and investments are charged capital gains taxes. If i was trading in a couple thousand, or even 500k dinar I might be able to say it wasn't an investment, but left over from a trip....if i had taken a trip. for me....the truth is it is an investment so it's gain is going to get taxed....and i'll pay that tax and be grateful for the gain and for the provision. thank you LORD! go R.I !!!!

Again... my CPA did not say it would not be taxed!! What he said was he couldn't find any tax code that addresses it. Do you know how many people (millions) travel abroad and exchange everyday without any tax consequences? My CPA also brought up an excellent point which we all maybe shooting ourselves in the foot. He said we should not be referring to this as an investment rather than a simply exchange. Now I thought to myself... why else would we purchase this... but the point being, don't give them any unnecessary ammunition. Listen... there are some smart people on this board... I just posted a link to all the tax codes. I challenge anyone to find it

Assuming he's right, how many people are going to exchange one hard currency for another? I mean, if the dinar RVs at $1 are you going to take in hundreds of thousands of dinar and leave the bank with hundreds of thousands in cash?

I think you misunderstood me... hard currency meaning we're exchanging one currency for another... not leaving the bank with millions of cash

[gbesley]

Thank you, Carol.Broker

I am a CPA and I don't know where these posters are getting their information from. There is no 70% tax being proposed!

[Captjohn]

Although unintended, you may have stumbled on the ultimate truth in the statement "Right now Dems are joining Republicans and placing pressure on the White Hose to keep all the Bush cuts in place". Yes, in fact we are all being hosed by this president and his accomplices. Great point!

In talking with my CPA, he stated that gains on currency would be treated the same as gains on securities; that is, on both a short-term basis (if held less than one year) and long-term basis (if held longer than one year) with appropriate tax rates applying.

[lechesuerte]

Very interesting.....thanks for your effort car. bro.! GO RV in 2010!!!

[Who_Dat_Gurl]

I was explained to me from someone that searched some info already, that it is already your money, you have already earned it and have been taxed on it already, so it will not go up that high. It will be a cash for cash transaction, though worth more, so that is why the capital gain tax. I was told no more than 20%. But please do not hold me to that. I have not searched myself. Anyone can add to this please feel free.

[rjboots1]

Carolina.broker, have you looked at section 988 transactions. Here's the reference (and it's a doozy): Title 26, Subtitle A, Chapter 1, Subchapter N, Subpart J, Section 988, then (a) (1) (A) "In General - 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)."

Then go down to © (1) (A), (, and © and you can get the definition of a "988 transaction". Point (A) (i) uses the term "nonfunctional currency, which it later defines as non-U.S. dollars, if the U.S. dollar is your "functional currency".

So, it is confusing, which I know it's intended to be, so that we need accountants and attorneys, and so the IRS can penalize us when they say we misinterpreted the code. But it really looks to me like capital gains don't even apply at all under any circumstance, but ordinary income taxes do, unless the tax code printout which I have is obsolete. But I just got it from a tax attorney about 4 months ago.

Anyway, for what it's worth. Good luck on your quest for truth, justice and the American way! If in fact, truth and justice ARE STILL the American way!

God bless!

Oh, and as far as this just being an "exchange" rather than an investment, the code covers that too. It's just an "exchange" unless you realize a gain of over $200. Then it becomes a taxable event. That is about 4 pages later in the code under a (e) (2) ( where it explains the term "personal transaction" which is like exchanging currency left over from a business trip of vacation. But then it says, "The preceeding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200. Oh well...

Edited September 16, 2010 by rjboots1

[vianney71]

Carolina.broker, have you looked at section 988 transactions. Here's the reference (and it's a doozy): Title 26, Subtitle A, Chapter 1, Subchapter N, Subpart J, Section 988, then (a) (1) (A) "In General - 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)."

Then go down to © (1) (A), (, and © and you can get the definition of a "988 transaction". Point (A) (i) uses the term "nonfunctional currency, which it later defines as non-U.S. dollars, if the U.S. dollar is your "functional currency".

So, it is confusing, which I know it's intended to be, so that we need accountants and attorneys, and so the IRS can penalize us when they say we misinterpreted the code. But it really looks to me like capital gains don't even apply at all under any circumstance, but ordinary income taxes do, unless the tax code printout which I have is obsolete. But I just got it from a tax attorney about 4 months ago.

Anyway, for what it's worth. Good luck on your quest for truth, justice and the American way! If in fact, truth and justice ARE STILL the American way!

God bless!

Oh, and as far as this just being an "exchange" rather than an investment, the code covers that too. It's just an "exchange" unless you realize a gain of over $200. Then it becomes a taxable event. That is about 4 pages later in the code under a (e) (2) ( where it explains the term "personal transaction" which is like exchanging currency left over from a business trip of vacation. But then it says, "The preceeding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200. Oh well...

GREAT RESEARCH! I hope for the BEST, but plan for the worst! I personally do not think a 70 % tax will be allowed, BUT don't put anything past the socialists in Washington. Their goal to to crush Capitalism & reduce everyone to being dependent on the government and unions, with all wages regulated by O's PAY CZAR .

If the Dinar RV's at anything over $1, there will be many, many people that were SINKING into debt, & now FREE and independent of the government & spending money back into the economy. This will put the Socialist movement back another generation, which they can NOT allow. So be prepared to be the target of VINDICTIVE TAXATION (tribute, as our founding fathers called it) And be prepared to suffer the insults of Obama. As the bond holders of GM had to face, along with the death threats for union thugs. All any of us can do is NOT tell anyone of the source of our success, & pay any reasonable taxes.

[carolina.broker]

Carolina.broker, have you looked at section 988 transactions. Here's the reference (and it's a doozy): Title 26, Subtitle A, Chapter 1, Subchapter N, Subpart J, Section 988, then (a) (1) (A) "In General - 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)."

Then go down to © (1) (A), (, and © and you can get the definition of a "988 transaction". Point (A) (i) uses the term "nonfunctional currency, which it later defines as non-U.S. dollars, if the U.S. dollar is your "functional currency".

So, it is confusing, which I know it's intended to be, so that we need accountants and attorneys, and so the IRS can penalize us when they say we misinterpreted the code. But it really looks to me like capital gains don't even apply at all under any circumstance, but ordinary income taxes do, unless the tax code printout which I have is obsolete. But I just got it from a tax attorney about 4 months ago.

Anyway, for what it's worth. Good luck on your quest for truth, justice and the American way! If in fact, truth and justice ARE STILL the American way!

God bless!

Oh, and as far as this just being an "exchange" rather than an investment, the code covers that too. It's just an "exchange" unless you realize a gain of over $200. Then it becomes a taxable event. That is about 4 pages later in the code under a (e) (2) ( where it explains the term "personal transaction" which is like exchanging currency left over from a business trip of vacation. But then it says, "The preceeding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200. Oh well...

Great find!!! I have forwarded this to my CPA for clarification and will post what he says... If indeed it will be treated as ordinary income... letting a corporation hold it makes ABSOLUTE sense!

[PNixon]

All any of us can do is NOT tell anyone of the source of our success, & pay any reasonable taxes.

Or grab a pitch fork. Has been needed for some time

[unclegeek]

If you believe the dems after all they've done, you're nutz. Between the capital gains AND the income tax you will get hammered. This is why there are overseas bank accounts and offshore corporations. That's my plan.

[kjwayne]

I,m on a fixed income that is under the tax LIMITS. THIS MEANS ,I DON,T HAVE TO FILE TAXES EACH YEAR. I went to a well known C P A and we sat down to discuss my up coming CHANGE IN INCOME. Short version is that it (RV) will be taxed as ordinary income but the amount of income will put me in the 35% tax bracket. Not capital gains but ordinary income. Just trying to help.

Every one will have different situation, be prepared.

[Kingdom Focus]

I though that the Government (this year or late last year) made it illegal for American's to have overseas bank accounts.

KF

If you believe the dems after all they've done, you're nutz. Between the capital gains AND the income tax you will get hammered. This is why there are overseas bank accounts and offshore corporations. That's my plan.

[cris]

This is great info Carolina.Broker.....i've always thought about this as a simple currency exchange, the same kind i do every time i travel outside america.....of course, i will seek legal advice as well.....keep us updated....go RV ffs!!!

[dumbnar]

You are going to pay taxes, if you convert your money with Dinar Trade or a bank, and if the value is higher than you bought, you will fill out several forms and one of the forms is a Form 1040 (Schedule D). That will be your Catipal Gains Tax Form, they will not exchange with out this filled out.

dumbnar

[truckerron49]

I,m on a fixed income that is under the tax LIMITS. THIS MEANS ,I DON,T HAVE TO FILE TAXES EACH YEAR. I went to a well known C P A and we sat down to discuss my up coming CHANGE IN INCOME. Short version is that it (RV) will be taxed as ordinary income but the amount of income will put me in the 35% tax bracket. Not capital gains but ordinary income. Just trying to help.

Every one will have different situation, be prepared.

What would that magic number be if you don't mind my asking. I too, am now on a fixed income due to my disability.. Thanks in advance..

[carolina.broker]

Ok... here is my CPA's response to jboots1 post on section 988 transactions. Title 26, Subtitle A, Chapter 1, Subchapter N, Subpart J. It's still not 100% clear... but I swear tax codes are meant to be confusing

Response:

RC Sec. 988 transactions include acquisition of nonfunctional currency-denominated debt instruments, foreign currency forward contracts, and disposition of nonfunctional currency.

I don't think that means converting dollars to dinars and back to dollares on a personal level.

Foreign currency transactions.

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

The above is from the 2009, IRS Publicaton 525.

The issue remaining is... Is the action of converting dollars to dinars and back to dollars a personal transaction

It may be, and if it is, it would be taxable at capital gains rates. 998 rules for ordinary income do not apply to individuals.

Most of the examples I have seen talk about purchasing personal items in foreign currency and selling in dollars, not exchanging currency.

That is the key question "Is exchanging currencies, a personal tranaction for this test"

My hunch is it it is.