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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Is there a tax on foreign currency if so what is it

Customer Question

is there a tax on foreign currency if so what is it
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Here is the later notice related to virtual currencies - but same principles are applied to all currencies

http://www.irs.gov/pub/irs-drop/n-14-21.pdf

This note contains references to corresponding statute and regulations related to currency transactions.

Actually a foreign currency is treated as a separate asset - so when you convert US dollars into a foreign currency - that transaction is treated as if you purchase that asset and establish your basis.

So - when you convert a foreign currency back to USD - that is treated as selling an asset - and based on assumed selling price - you woudl have either capital gain or loss.Again - that applied to investment transactions - not personal transactions. For personal transactions - loss is not deductible; the gain up to $200 is not reported and larger gain is reported as short term capital gain.

Expert:  Lev replied 1 year ago.

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