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Aloha Legalease,LLC tax deferral question:Q:Is there a

Resolved Question:

Aloha Legalease,
LLC tax deferral question:
Q:Is there a way to capitalize an LLC using say an Independent Manger as fiduciary, such that any gains on the asset (foreign currency) used in the capitalization would be Recognized, but not be considered Realized by the IRS if reinvested within the LLC?
Thanks!
Rich
Submitted: 1 year ago.
Category: Tax
Expert:  Fran-mod replied 1 year ago.
I will notify Legalease that your question is waiting for him. He will see my message when he next checks his email.
Expert:  MaryMeadenEsq replied 1 year ago.

Hello again Rich --

-

THank you for requesting me for this additional question -- and I do apologize for the delay here - I was offline for a few days and just checked in again and saw this question.

-

The question as you ask it above is actually a TAX question and should be answered by one of the tax experts here at Just Answer -- this is not my area of specialization. That being said, I am going to transfer the question to our tax department and a professional there should be able to answer your questions.

-

-

MARY

Expert:  USTaxAdvising replied 1 year ago.

Hello,

Thank you for using justanswer. I can assist you with your questions today.

 

Foreign currency gains (IRC 988) arise from receivables and payables denominated in a foreign currency but paid for in the company's functional currency. You can also have foreign currency gain or loss from the expiration or sale of forward currency contracts.

http://www.law.cornell.edu/uscode/text/26/988

 

Q:Is there a way to capitalize an LLC using say an Independent Manger as fiduciary, such that any gains on the asset (foreign currency) used in the capitalization would be Recognized, but not be considered Realized by the IRS if reinvested within the LLC? - No there is now way to recognize a foreign currency gain for book purposes and not recognize it as realized for US federal income tax purposes. If you have a foreign currency gain for book purposes it will be realized for tax purposes as well, albiet it may not be ordinary income it may be capital, it depends on the character of the asset of which is giving rise to the gain/loss. For example, if you purchased stock of a foreign company in EUR and your functional currency is USD then the foreign currency gain/loss on sale would be included in the gain/loss of the stock and would be capital in nature. On the other hand if you invested in a forward currency contract the gain or loss on sale would be ordinary income and not capital gain.

 

I hope this helps. Please let me know if you have any further questions.

 

Best regards,

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1111
Experience: US Taxation specialist.
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