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-   -   Gain due to foreign exchange rate fluctuation (https://www.askmehelpdesk.com/showthread.php?t=275157)

  • Oct 29, 2008, 08:13 PM
    msfantastic
    Gain due to foreign exchange rate fluctuation
    Scenarios: You send $10,000 to a foreign country's savings account. You earn $100 in interest and report it in your individual income tax return. Later, you send $10,000 back to the US and gain $50 due to a change in exchange rate.
    In this case, do you have to report $50 you made due to exchange rate change in your individual income tax return?
  • Oct 30, 2008, 08:27 AM
    IntlTax

    Yes, see Code § 61 ("all income from whatever source derived"). The $200 de minimis exception in Code § 988(e)(2) would not apply because this would not be a "personal transaction." Code § 988(e)(3).
  • Oct 30, 2008, 10:32 AM
    AtlantaTaxExpert
    Yes, you would report it as a capital gain.

    The duration of the transactions being longer or shorter than a year and a day would determine whether the gain is long-term or short-term.
  • Oct 30, 2008, 11:24 AM
    IntlTax

    The gain would be ordinary income. See Code § 988(a)(1)(A).
  • Oct 30, 2008, 11:56 AM
    AtlantaTaxExpert
    That seems counter-intuitive, but I yield to your greater expertise.

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