Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

Is there tax on currency exchange?

Customer Question
If I bought a foreign...

If I bought a foreign currency at a low rate then exchanged it later at a better exchange rate, do I have to report the difference on my tax return? If so, what sort of tax would be due?

Submitted: 7 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 hours by:
12/1/2009
Tax Professional: Lev, Tax Advisor replied 7 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
Experience: Taxes, Immigration, Labor Relations
Verified

Yes - the income from currency exchange is your taxable income and is reported as capital gain - long or short term depending how long you held the foreign currency - more or less than a year.

If you have a gain on a personal foreign currency transaction because of changes in exchange rates, you do not have to include that gain in your income unless it is more than $200. If the gain is more than $200, report it as a capital gain.

The purchase of the foreign currency is not taxable transaction.

The sale transaction is reported on the schedule D - http://www.irs.gov/pub/irs-pdf/f1040sd.pdf

If you held the foreign currency more than a year - the gain will be taxed at reduced rate - not more than 15%.

If you held the currency less than a year - the gain will be taxed at your regular tax rate.

State taxes are extra.

Let me know if you need any help.

Ask Your Own Tax Question
Customer reply replied 7 years ago

Thanks for your answer. My situation involves my LLC. Does that change anything? So then if I decide to travel and buy foreign currency for my trip. Upon returning cash in any remaining foreign currency for dollars, do I have to report and gain/loss since the purchase? If so, it would seem that I should be able to get credit for the weakening dollar and be able to report that loss in value, Right?

Tax Professional: Lev, Tax Advisor replied 7 years ago

Generally, single member LLC is disregarded entity - means - all income and expenses are reported on the owner's individual tax return - schedule C - so there should not be any difference if you have LLC or you are a solo proprietorship.

All transactions are booked in US dollars - and if you have any gain/loss on foreign currency transactions are calculated in US dollars and only if the foreign currency converted back into US dollars.

There is no gain/loss recognized if you keep funds in a foreign currency without converting back into US dollars or into a different currency.

If the gain for the tax year is less than $200 - you do not need to report it as your income.

However - if the gain is more than $200, - it should be reported it as a capital gain.

Let me know if you need any help with reporting.

Ask Your Own Tax Question
Customer reply replied 7 years ago

So if I cash it into another foreign currency that is close to the dollar and then from that currency into dollars (representing little or no gain form the second currency to the dollar) is there a tax issue still lingering for the first trade?

To be more exact:

I purchased a large amount of Iraqi dinar valued at the time of purchase at .000855 to the dollar. I am expecting it to revalue soon to over a dollar per dinar. So should i at that point exchange it into another currency and then into dollars? I promise this is my last point i need addressed. You have been very helpful and I plan on accepting your answer.

Tax Professional: Lev, Tax Advisor replied 7 years ago

If you purchased Iraqi dinars for - let say $10,000 - that should be treated the similar way as you purchase shares or any other property.

There is no any capital gain as long as you hold Iraqi dinars.

If you sell them - that is a sale and there might be capital gain/loss. If you sell - lets say for $11,000 - you would have $1000 taxable gain.

If you exchange Iraqi dinars for other currency - not US dollars - that transaction should be treated as if you sell Iraqi dinars for US dollars and use these funds to purchase another currency. That is similar if you instead of selling your property - exchange it for another property. If your Iraqi dinars are worth $11,000 at the time of exchange - - you would have $1000 taxable gain.

Let me know if you need any help with reporting or you need any clarification.

Sorry if I would not be able to respond promptly.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
30,162 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
What are the taxes rates 2016 for term gains in irrevocable
what are the taxes rates 2016 for long term gains in irrevocable trusts … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
A foreign individual is a member of a US LLC. Are there any
A foreign individual is a member of a US LLC. Are there any extra requirements for filing when it comes to the partnership return?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
Can my LLC with US and Foreign members be a shareholder in
Can my LLC with US and Foreign members be a shareholder in an S Corporation? The K-1 would go to the LLC.… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Given that the current 1041 tax rate on 401(k) income is
Given that the current 1041 tax rate on 401(k) income is $3206 + 39.6% over $12,400, what will be the new tax rate and will it apply for 2017?… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Is the sale of customer list a capital gain or ordinary income?
Is the sale of self-created intangibles, such customer lists, digital files, web sites, etc subject to capital gain or ordinary income treatment?… read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
I am a personal injury attorney doing a schedule c as we
I am a personal injury attorney doing a schedule c as we speak. . … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
How to report the sale of a property outside US? How to
How to report the sale of a property outside US? How to claim the taxes paid abroad on the profit made by selling property overseas?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What would the federal and state tax rate percentages be for
What would the federal and state tax rate percentages be for a $7700 IRA early withdrawal in Ohio?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
On a Partnership K-1, foreign income items are reported on
On a Partnership K-1, foreign income items are reported on Line 16, but in addition there is a separate schedule listing foreign currency gain, Subpart F income and qualified fund income under Sec 129… read more
abci168
abci168
Principal
27 satisfied customers
I am aware that a foreigner can form an LLC in the states.
Hi,I am aware that a foreigner can form an LLC in the states. My question is; if he/she is living in Japan and wants to live in California by starting a business, is forming an LLC here in the US solv… read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
What is the income tax rate if it is not withdrawn from the
Hi! What is the income tax rate if it is not withdrawn from the LLC? The owner has not withdrawn any balance from the business all the amount reinvested into the business. Thank you!… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
Second opinion] Has the tax rate in Peru on capital gains
Second opinion] Has the tax rate in Peru on capital gains for non residents recently been changed? I heard it is now 5% and no longer 30%.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
THE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS
tHE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS INCORRECT . i CAN NOT ACCERSS dD. p;EASE DVISE HOW I CAN ACEESS THE SCHEDULE … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What is capital gains tax rate for sale of home: My mom is
What is capital gains tax rate for sale of home: My mom is selling her home and has zero income. She is on social security. … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x