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TAXES..HELP!!!!!


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JMO....It's going to be ALOT consider the spread you pay when you cash in :o , plus fed taxes <_< , plus state taxes, plus lottery taxes, :unsure: plus windfall taxes :blink: ....And any other taxes they can pull out of their #$! ... You better go VIP/OSI Fast or you might pay out 60-70% :angry: ....Again JMO... I'm outta here!!!

Go RV!!! B)B)B)

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I believe it is treated as just income. The current highest rate is 35% for fed but depending on Obama, he may raise it to 39.6%. State taxes vary so check your own state's website. Here is Colorado it is a flat 4.6% currently.

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You do not pay taxes when you cash in. It will be your responsibility to pay your taxes quarterly. For example ( not taking state or local tax into consideration), you cash in your IQD and you have $1M in USD left over. The $1M will be treated as ordinary income subject to a tax of 35%. You will need to pay the IRS a total of $350K. That payment can be made in four payments within the calendar year. You should be relying on tax pro's to provide guidance on this.

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You do not pay taxes when you cash in. It will be your responsibility to pay your taxes quarterly. For example ( not taking state or local tax into consideration), you cash in your IQD and you have $1M in USD left over. The $1M will be treated as ordinary income subject to a tax of 35%. You will need to pay the IRS a total of $350K. That payment can be made in four payments within the calendar year. You should be relying on tax pro's to provide guidance on this.

thanks..what about the people that has been holding dinars for over a year..what the taxes then ?

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Found out today that the profit you make from the cash in will be treated as Capital Gains. Long term Cap Gains is taxed around 28 to 30% (need docs that you held it for over a year)and short term Cap Gains is taxed around 35 to 38%. Go to www.irs.gov and search for Publication 525 Foreign Currency Section. . It is about 4 sentences long which says - If you profit $200 or less when you exchange foreign currency there is no tax, anything over that is taxable and it falls under Capital Gains, per the info given by IRS Agent, Mr. Kirk ID#5906613 in the Complex Individual Issues Dept. at 1-800-829-1040.

The above info was provided by another DV earlier today. Look for tax shelters or set yourself up with an Seychelles Corp and a bank account in Balize - per Adam's advice.

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  • 6 months later...

Found out today that the profit you make from the cash in will be treated as Capital Gains. Long term Cap Gains is taxed around 28 to 30% (need docs that you held it for over a year)and short term Cap Gains is taxed around 35 to 38%. Go to www.irs.gov and search for Publication 525 Foreign Currency Section. . It is about 4 sentences long which says - If you profit $200 or less when you exchange foreign currency there is no tax, anything over that is taxable and it falls under Capital Gains, per the info given by IRS Agent, Mr. Kirk ID#5906613 in the Complex Individual Issues Dept. at 1-800-829-1040.

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

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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

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Skitealwedrop --

It seems simple to say, but it is not as simple as that. First, maybe I should let you know that I have consulted CPA's, I have consulted with an International Examiner (one who has authority to make decisions on Section 988 stuff), I have consulted attorneys. Most of all, I am an attorney and have been so deep in this stuff that I sometimes have other attorneys and CPA's consult ME on these issues. In my analysis and that of the majority of the professionals I have spoken with, your statement above would be incorrect. If you would like a more detailed answer as to WHY it is most likely NOT capital gains, read the following link:

I am, however, able to argue the other side of the coin and did so in a recent submission I made to the IRS requesting guidance. If you would like an even more in depth look at the analysis, read here:

Best of Blessings,

Mark

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Thanks for your input Mark. I'm not here to argue with someone that purports to be an Attorney with so much knowlege of tax law. It is my opinion that each of us should consult our CPA's with regard to tax implications should the RV occur.

But. . . what if one's CPA has no clue and thus gives bad advice?

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Find a CPA that clearly understands the tax law pertaining to Capital Gains. At the end of the day you own the tax liabilty. Hopefully, we will all be lucky enough to have one, if you catch my drift.

What if it is the law that counts and not an IRS publication?

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See www.irs.gov This reference came from a call to an IRS agent.

Publication 525 page 33

publication updated September 6 2010

bottom middle column

Foreign Currency Transactions

Capital Gains: Long Term = hold 1 year AND 1 day Tax 15%

Short Term = hold anytime as 1 year or less Tax 35 %

This is if they do not set a specific TAX for this event.

This is also if this event cannot be considered as a like kind exchange. which is a completely different set of rules.

ONLY THE IRS CAN DECIDE, and most probably after the event AND whatever will create the higher Tax paid in.

Considering the profit most will receive from this event, the best advice is to have a Tax Attorney advise you.

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See www.irs.gov This reference came from a call to an IRS agent.

Publication 525 page 33

publication updated September 6 2010

bottom middle column

Foreign Currency Transactions

Capital Gains: Long Term = hold 1 year AND 1 day Tax 15%

Short Term = hold anytime as 1 year or less Tax 35 %

This is if they do not set a specific TAX for this event.

This is also if this event cannot be considered as a like kind exchange. which is a completely different set of rules.

ONLY THE IRS CAN DECIDE, and most probably after the event AND whatever will create the higher Tax paid in.

Considering the profit most will receive from this event, the best advice is to have a Tax Attorney advise you.

That's true.

But one needs to understand that only the IRS Code which I know is written by Congress) counts. Neither a guy on the phone nor the IRS publications does.

Someone earlier mentioned about being sure one's CPA takes responsibility. Well, it does matter whether a CPA takes responsibility or not. The IRS only makes oneself responsible.

NOW I find it amazing how the research made by the attorney here (free of charge, mind you) is being nearly completely disregard. He clearly stated as a result of his research he found that the IRS written Publication 525 document was not correct, and the Code which he cited was the only thing to be validly regarded. WHY is this?

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It is nice that people are staying civil. So many other places I understand that is not he case.

Anyway, the reason for this post is just to say that I hope we will not need to worry about the analysis of this situation. The IRS recently published it's Priority Guidance Plan 2011-2012. In this plan they state they will give guidance on Section 988. I HOPE that this decision is at least in part to the submission I made (link listed above in prior post). However, they make no indication as to what part of section 988 they will be giving guidance on.

So, they have 317 projects they are working through from July 2011 through June 2012. Section 988 is just one of them. All we can do is wait and hope that the guidance they give applies to our situation. Waiting and hoping is something all of us should be very good at by now.

To see the plan go to: http://www.irs.gov/pub/irs-utl/2011-2012_pgp.pdf . Look in Section H - Other. You will find Section 988 listed under item #6.

Best of Blessings,

Mark

P.S. For corroboration of my analysis by a well known CPA please see the following Forbes Article about our investment.

http://www.forbes.com/sites/greatspeculations/2011/07/27/is-the-iraqi-dinar-worthless-paper-or-maker-of-millionaires/

Mr. Green worked with a tax attorney prior to writing this article.

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See www.irs.gov This reference came from a call to an IRS agent.

Publication 525 page 33

publication updated September 6 2010

bottom middle column

Foreign Currency Transactions

Capital Gains: Long Term = hold 1 year AND 1 day Tax 15%

Short Term = hold anytime as 1 year or less Tax 35 %

This is if they do not set a specific TAX for this event.

This is also if this event cannot be considered as a like kind exchange. which is a completely different set of rules.

ONLY THE IRS CAN DECIDE, and most probably after the event AND whatever will create the higher Tax paid in.

Considering the profit most will receive from this event, the best advice is to have a Tax Attorney advise you.

I know we have moved on already, but I saw this in my email this morning and I feel that there is an important point being missed. I don't want to seem argumentative. I really want people to have the best information they can when making decisions.

First of all, I'll remind everyone that the law that controls All foreign currency transactions is Section 988. (Even forex trades that fall under Section 1256 are allowed to do so by section 988. That is where it all stems from.)

LIKE KIND EXCHANGE

The regulations under section 988 state the following:

Section 1.988-2 Recognition and Computation of Exchange Gain or Loss

(a )(1 )(ii ) Clarification of section 1031. An amount of one nonfunctional currency is not “property of like kind” with respect to an amount of a different nonfunctional currency.

(Nonfunctional Currency means foreign currency for our purposes.)

Within the body of Section 988 we are told

(C ) Special rules for disposition of nonfunctional currency

(i) In general In the case of any disposition of any nonfunctional currency—

(I) such disposition shall be treated as a section 988 transaction, and

(II) any gain or loss from such transaction shall be treated as foreign currency gain or loss (as the case may be).

You mind find it interesting to note that "disposition" of nonfunctional currency means anything you use it for. An example given in the regulations is spending the foreign currency on a hotel room in the foreign country. Of course, getting rid of it in exchange for USD is also, "disposition."

Anyway, I guess the point I am driving at here is that the only thing that will allowed to be "like kind exchange" with IQD is exchanging IQD for other IQD of different denomination. That would still be considered "like kind." Everything else is off limits.

MISSED POINT

Estewart is correct. The IRS Publication (Pub 525 Pg. 33) does not count. The law (Section 988) is what counts. However, that is not the real issue because Pub 525 Pg. 33 is almost a direct quote from the law. The law says the same thing. However, the law goes on to indicate that "Personal Transactions" does not include business or INVESTMENT. That is the real issue here.

The IRS does not view investing as a "Personal Transaction" even if it is a personal investment. They segregate all investment. A "Personal Transaction" is when you exchanged to French Francs because you are going to see the Eiffel tower. It does not apply when you have made an exchange to hold for profit.

I hope that has been helpful.

Best of Blessings,

Mark

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