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The Facts About The Capital Gains Tax


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Unfortunately, they blow your assertions out of the water with the last subsection...

(e ) Application to individuals

(1 ) In general

The preceding provisions of this section shall not apply to any

section 988 transaction entered into by an individual which is a

personal transaction.

(2 ) Exclusion for certain personal transactions

If -

(A ) nonfunctional currency is disposed of by an individual in

any transaction, and

(B ) such transaction is a personal transaction,

no gain shall be recognized for purposes of this subtitle by

reason of changes in exchange rates after such currency was

acquired by such individual and before such disposition. The

preceding sentence shall not apply if the gain which would

otherwise be recognized on the transaction exceeds $200.

(3 ) Personal transactions

For purposes of this subsection, the term ''personal

transaction'' means any transaction entered into by an

individual, except that such term shall not include any

transaction to the extent that expenses properly allocable to

such transaction meet the requirements of -

(A ) section 162 (other than traveling expenses described in

subsection (a)(2) thereof), or

(B ) section 212 (other than that part of section 212 dealing

with expenses incurred in connection with taxes).


As you can see, they deem that unless you are using this foreign currency transaction as an individual for travel expenses or other "non-gain" reasons beyond $200 gain... then you wouldn't have to pay it as capital gains tax. So, it looks like the 15% over a year, 35% under a year capital short and long-term gains taxes will apply to our Dinar revaluation cash-in profits...

And yet another posting of yours I fully agree with!!! Great Work! This is the exact standing the IRS holds on this!

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There are so many people in the US that hold dinars,that it would be my guess that the IRS will issue a special ruling on the tax rate on cashing in our dinars. This will certainly resolve the issue once and for all!!!!!!!!!!!!!!!111

I agree. Especially since our government needs as much money as it can get, they will be clarifying this for us before the tax is due for sure!!! It clearly is a gray area right now though. I looked into getting a special ruling letter and one of the requirements was that it (letter) must not be for the sole purpose of reducing taxes (which is what we're trying to do). It also said a special ruling letter would be superceded by any future ruling the IRS may put out, meaning that they may give it to you now, but they are reserving the right to rescind it later on with a specific ruling. I think they cover all the bases and they'll get as much as they can. I'm just really hoping we revalue close to market so that leaves plenty of room to pay hefty taxes!!! It'd also be nice if some of those wilde rumors about lower tax brackets if you cash in early - were true! ;)

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Second, if they can understand these publications then they need to start reading up on this. Publication 550, page 40, paragraph titled “Foreign Currency Contract” is the place to start. I have been informed by the IRS that this will not be Capital Gains and will not be taxed as such. Anyone reporting this on Schedule D with their annual tax return will have a 99.9% chance of being audited.

this comes from a level 2 tax specialist that says the IRS told him this directly.

call the IRS yourself and see what they tell you

We have a member here, ExecConsult, who is an attorney out of Kansas. He, and a few colleagues, have put together an extensive letter to the IRS requesting a review and answer regarding the tax debate for our tax question. The letter is posted here, probably posted under Taxes.

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yes but there is also a place for "preparer" who also signs the return indicating it was not prepared by the tax payer but by a professional.

A guy at H&R block told me that one benefit of having a pro do your taxes is their company is responsible for any mistakes, not the customer

That's why you should think about removing Block from your list....hope that was the only statement that they got wrong.......

Try look up circular is spelled out in words of one syllable, neglect apart, who is responsible for your return.

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Second, if they can understand these publications then they need to start reading up on this. Publication 550, page 40, paragraph titled “Foreign Currency Contract” is the place to start. I have been informed by the IRS that this will not be Capital Gains and will not be taxed as such. Anyone reporting this on Schedule D with their annual tax return will have a 99.9% chance of being audited.

this comes from a level 2 tax specialist that says the IRS told him this directly.

call the IRS yourself and see what they tell you

I actually did call the IRS and I was transferred over to a department that deals with foreign currency, the lady there said that any increase/gain over $200 is taxable at the Capital Gains rate, which anything over a year is 15% and anything under a year could be up to 35%. This is what I was told by the IRS. The person I talked to could have been wrong...for everyone's sake I hope not:) 15% is way better than almost 50%:(

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I have read what you have read!!!! That is why I got the inside scoop as to how the IRS is going to tax our invetment. I cannot chage the way the IRS is going to look at this and neither can my sister. I just wanted to post the FACT as to not mislead anyone and get them in trouble by accepting the wrong advise. Again, call the IRS for youself and ask for a MANAGER and get the info for yourself if you doubt the validity of what I am saying.


The figure for capital gains tax are correct at 35% for short term and 15% for longer term (over one year and one day). That is not the argument. This investment may not be considered capital gains, and coul be taxed as regular income at 35%.

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

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This whole discussion only proves to me that the whole tax code is far too complicated. It is no wonder there are so many people in trouble with the IRS and that these tax help attornies are their own cottage industry.

Personally, and without any special knowledge of the tax code, I would hope for the cap gains. When I get 1099s and it is added as income, I have to pay Social Security tax (15%) right off the top. :confused:

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Thanks for all the information about the tax code... very intresting.

There is one thing I keep hearing that I can't figure out. Which is that the govt. needs our money "Really"?

Didn't the RV take them totally out of debt? So where is the need? Shouldn't our taxes go down? Just wondering.

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Not right away but with all the 10 year olds who think it is funny to type penis on Miley Curus wikipedia or trash justin beiber on his wiki, they have their work cut out.

They keep a CLOSE eye on changes and will fix usually within hours of an edit.

Wikipedia is easily 99% truth. Minus some of the info without citations which is stated if that is the case.

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you are basicall correct with the exception, those percentages are at the top of the long/short term rate. UP TO 15% long term UP TO 35% short term. Dependant on tax bracket could be less on both long or short. planning calculator is attached. Peace


Yeah! Most are in the 25%

Federal tax bracket. So you would pay a short term 25% long term 15% Federal tax.

And if it actually RV's near the end of the year you could just quit your Jobe and wait to cash in at the beginning of the year. Then you would be paying long term 0% Federal tax! :D

I sure hope it's capital gains.

If their is actually a plan and this is going to happen. The governmint should have plenty of money anyway, as they will have reserved enough Dinar of their own.

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My sister is a 25 year employee at the IRS and she states the Ferderal Tax Laws that are currently in place state that investment earnings under 1 will be subject to a 35% Capital Gains Tax. Investment earnings over 1 year will be subject to 15% Capital Gains Tax. *THIS IS CONFIRMED and is the current Tax Law. Also, Obama is currently working on increasing the Capital Gains tax VERY SOON (Increased Tax rate unknown at this time).

The IRS doesn't care what any other "financial professionals" are stating, they are following the Federal Tax Laws. The IRS considers Foreign Currency Purchases an "investment" that will be subject to Capital Gains Tax Laws.

I hope this helps. If you are still unsure, you can call the IRS yourself.


It is obvious to me that your sister is referring to the exception under section 988(e) for a personal transaction. My analysis says that because we have purchased the dinar as an investment, we can not take the "personal transaction" exception. I have a friend who works as a criminal investigator with the IRS. She had my analysis of the investment looked at by an "International Examiner" who agreed. Therefore, according to my analysis and the International Examiner, this investment should be taxed as interest income which is ordinary income. However, though the IRS seems to take this line of thinking currently I feel that there may be sufficient justification under the law to fight it if need be. (More on that later.)

Yes that would be true IF this was considered an investment. I really do not believe it is... Ask your sister about Publication 550, page 40, paragraph titled “Foreign Currency Contract” and please get back with me. I am not being sarcastic. I really am interested in what she has to say about it.

Unfortunately for us, we are not using any foreign currency contracts. We hold the physical currency and it is not under contract. Currency contracts are controlled by section 988 too, but you are allowed to opt out of section 988 transactions into section 1256 for many contracts (spot contracts, forward contracts, etc...). So, what you were studying does not apply to us.

There was another post on DD's site today that claims he talked with the IRS and they said it would be treated as ordinary income.

Just goes to show, ask a dozen people the same question and get a dozen different answers.

If some got a ruling letter from the IRS they should post it. That is what will protect you in the event someone else at the IRS tries to say otherwise after you file any tax returns.

I did a post on this once titled something like "What the IRS really has to say." Basically boils down to this. No one you can call in and speak with has been trained on foreign currency exchange gains and they are not supposed to even attempt to answer your questions. In fact it is on a list of things they are not supposed to answer. However, most call center employees do not refer to their lists often enough. And - yes the people in the "Complex Individual Issues" area are still call center employees who are not trained and not qualified to answer your questions on this matter.

I also talked to several forex investors and they all say they send you a w-9 every year just like regular income job,, and all forex does is currency trading so I would think this falls into same category

See above - forex is for foreign currency contracts - forex investing can be taxed differently then what we have here.

I dont know how it will work being company money and accounts, but I do have several companies to spread it around in and hide it in all kinds of nooks and crannies of those companies!

I will see what my tax guy says...I was afraid to mention dinar related things to him but I found out yesterday that he is invested to!! lol

You should discuss with your tax guy how you might convert some of these gains into income producing assets without any gain recognition by fully utilizing the bonus depreciation available for 2011 for capital investments. For instance - take income from the dinar; spend the income on equipment; fully depreciate the equipment and take the expense to offset the income; have net zero income but have a whole bunch of shiny new equipment to make money with.

Your tax guy might be interested in my most recent work on the subject. I posted the text of it a while ago. It is a submission I made to the IRS to be considered for their annual Guidance Priority List. In it I do not include all the things in the regulations that show me that the intent of section 988(e )(3 ) is to capture investment intent. Instead I argue for capital gains treatment. Anyway, it brings up issues that need to be considered. The post can be found here:

Hope this is helpful.

Best of Blessings,


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