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    msfantastic's Avatar
    msfantastic Posts: 13, Reputation: 1
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    #1

    Oct 29, 2008, 08:13 PM
    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?
    IntlTax's Avatar
    IntlTax Posts: 831, Reputation: 23
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    #2

    Oct 30, 2008, 08:27 AM

    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).
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #3

    Oct 30, 2008, 10:32 AM
    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.
    IntlTax's Avatar
    IntlTax Posts: 831, Reputation: 23
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    #4

    Oct 30, 2008, 11:24 AM

    The gain would be ordinary income. See Code § 988(a)(1)(A).
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #5

    Oct 30, 2008, 11:56 AM
    That seems counter-intuitive, but I yield to your greater expertise.

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