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Lev
Lev, Tax Advisor
Category: Tax
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What kind of tax(s) would I be looking at with a foreign currency

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What kind of tax(s) would I be looking at with a foreign currency exchange (hard currency not FOREX) in 2009 and 2010? ie Capital gains (long and short term), personal income tax, foreign currency exchange tax, etc.
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.

A gain on a personal foreign currency will be recognized if transaction occurred. If the gain is less than $200 - it will not be a taxable income (see IRS publication 525 page 33 for reference - http://www.irs.gov/pub/irs-pdf/p525.pdf).

 

The gain more than $200 is reported as capital gain

Let me know if you need help with reporting.

 

Customer: replied 7 years ago.
On a net $300,000.00USD transaction are the only taxes going to be Capital Gains (short term 35%, long term 15%) and personal income tax (28%)? Is there a Foreign Currency Exchange tax when the exchange takes place in the US?
Expert:  Lev replied 7 years ago.

Is there a Foreign Currency Exchange tax when the exchange takes place in the US?

There is no any transaction tax on the currency exchange and it doesn't matter where - in the US or abroad the exchange took place.

 

I am not aware of any clear determination if the currency conversion gains may be treated as long term capital gains.

My assumption is that the foreign currency is a capital asset and depending on the time of transaction you may use long term capital gain rate.

 

Customer: replied 7 years ago.
Are my tax percentages ( Capital Gains short term 35%, long term 15%) and personal income tax of 28% based on $300,000.00USD correct? I am trying to calculate a net gain after all taxes.
Expert:  Lev replied 7 years ago.

 

If the currency was held less than a year - that will be short term gain - taxable as your regular income - most likely at 35% tax rate.

 

My assumption is - if you kept the currency more than a year - you may report the gain as long term capital gain - taxable at 15%. But there is no clear indication if any IRS document if we may or may not use that rate for currency conversion gains.

With such large amount - you likely will trigger AMT.

 

25% and 28% rates on capital gains are not applicable to this situation. - http://www.irs.gov/taxtopics/tc409.html

Lev and other Tax Specialists are ready to help you
Customer: replied 7 years ago.
I was looking at two tax liabilities, one as 28% tax on personal income and the other as 35% short term Capital Gains. Is this correct?
The conversion requires a FinCen104 to be filed, is this the AMT you are refering?

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