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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

Many Topics Including The Oldest Dinar Community. Copyright © 2006-2020


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Bama Diva
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Currency Exchange Taxation

Bama Diva
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Post by Bama Diva Tue 02 Jul 2013, 9:22 pm

There was an interesting conversation in the chat room earlier today regarding how   currency exchange is taxes. I began some research tonight and will post some articles that I've found that seems to address the subject. I have no idea what the IRS will rule, but there is some interesting reading to be had on the subject. 

An Introduction to Currency Taxation
Posted by IWC on September 28, 2012
A basic understanding of currency exchange principles is critical for U.S. expatriates, international business people, and global investors.
U.S. tax liability is determined in U.S. dollars. Because currency values change relative to one another, many tax issues arise when currencies are bought and sold. Last month, we discussed general factors affecting relative currency values and currency exchange rates. This month we will look at general questions of currency exchange taxation:


  • If foreign currency is purchased and the value of that currency goes up prior to sale (you get more dollars back than you started with), is that gain taxed as a capital gain or as ordinary income?
  • If foreign earned income is exchanged for dollars (no gain on invested capital), how is that taxed? And, what if foreign earned-income is never exchanged for dollars, how is tax computed in that case?


[b style="padding: 0px; margin: 0px;"]Gain on Sale of Currency: Ordinary Income[/b]
Long-term capital gains income is usually taxed at a lower rate than ordinary income (which is taxed at an individual’s marginal tax rate). When foreign currency is purchased and later disposed of, as an investment or as a hedge, the gain or loss on the disposition (sale) of that foreign currency will be taxed as ordinary income. This is distinct from the purchase and later sale of other investment assets, which typically get capital gains treatment. The reason for ordinary income treatment of currency transactions is that Congress views currency fluctuations as tied to interest rate changes. Thus, the fluctuations are taxed as if they were interest earned, as ordinary income.



[b style="padding: 0px; margin: 0px;"]Personal Currency Transactions[/b]
Personal currency transactions (those not for business or investment purposes, as for a vacation) receive distinct tax treatment. Currency gains or losses less than $200 are de minimis and have no tax effect. If the gain is higher, then it is taxable as a capital gain (not as ordinary income, as above). Losses on currency exchanges from non-profit-seeking endeavors are normally not deductible. Similarly, a currency gain on the sale of a personal residence (sold in foreign currency) in a foreign country is taxable, but a currency loss on the repayment of the mortgage would not be deductible.

http://www.integratedwealth.com/an-introduction-to-currency-taxation/


Last edited by Bama Diva on Tue 02 Jul 2013, 9:24 pm; edited 1 time in total (Reason for editing : added info)
slj9999
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Post by slj9999 Tue 02 Jul 2013, 9:32 pm

Thank You Bama.
dizzydee
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Post by dizzydee Tue 02 Jul 2013, 9:45 pm

). When foreign currency is purchased and later disposed of, as an investment or as a hedge, the gain or loss on the disposition (sale) of that foreign currency will be taxed as ordinary income



Looks like we will be paying income tax on our investment.

thanks Bama
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callie
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Post by callie Tue 02 Jul 2013, 9:48 pm

Thanks for all the research Bama
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Post by jbowhunter Tue 02 Jul 2013, 10:52 pm

dizzydee wrote:). When foreign currency is purchased and later disposed of, as an investment or as a hedge, the gain or loss on the disposition (sale) of that foreign currency will be taxed as ordinary income



Looks like we will be paying income tax on our investment.

thanks Bama

 Seems to contradict the IRC you posted.  
https://nenosplace.forumotion.com/t9537-currency-trading-q-a#21247
This link says Long-term capital gain the way I read it.   If you have held more than one year obviously.  
country70girl
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Post by country70girl Wed 03 Jul 2013, 12:40 am

dizzydee wrote:). When foreign currency is purchased and later disposed of, as an investment or as a hedge, the gain or loss on the disposition (sale) of that foreign currency will be taxed as ordinary income



Looks like we will be paying income tax on our investment.

thanks Bama

 Personal currency transactions (those not for business or investment purposes, as for a vacation) receive distinct tax treatment. Currency gains or losses less than $200 are de minimis and have no tax effect. If the gain is higher, then it is taxable as a capital gain (not as ordinary income, as above). Losses on currency exchanges from non-profit-seeking endeavors are normally not deductible. Similarly, a currency gain on the sale of a personal residence (sold in foreign currency) in a foreign country is taxable, but a currency loss on the repayment of the mortgage would not be deductible.

Paying capital gains, not operating as a business.  :)
csd9013
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Post by csd9013 Wed 03 Jul 2013, 2:01 am

Thanks for the info, Bama.
duck2000
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Post by duck2000 Wed 03 Jul 2013, 5:19 am

those not for business or investment purposes

this is clearly the latter!

  Monday, March 22, 2004 9:08:11 PM


New Iraqi Dinar (NID)
Presidential Order 13303 allows US Citizens to invest in the New Iraq. Under this Order and the Coalition Provisional Government Order 39, a US citizen has the same rights to investments as an Iraqi citizen
IRAQ (PRWEB) March 2, 2004 -- Investment in the new Iraq is guaranteed under the Presidential Order 13303 removing sanctions on investment in Iraq. The new order allows for a restructuring of the banking system in Iraq. US citizens are allowed to invest in Currency, Stocks, Bonds, Real Estate and Business in Iraq.
Iraq has a new currency to replace Iraq’s two currencies, one of which was easily counterfeited and mostly circulated in a single denomination. Banks issue only the new currency and government employees paid in cash will receive their salaries in the new currency. Until January 15, 2004 the old and new currencies will circulate freely at a fixed exchange rate. Exchange between the old and new currencies is conducted at now charge at multiple exchange points around the country.
The other financial market structures are strong:
95 percent of all pre-war bank customers have service and first-time customers are opening accounts daily. Iraqi banks are making loans to finance businesses. The central bank is fully independent. Iraq has one of the world’s most growth-oriented investment and banking laws.
The new Iraqi dinar which is printed bu De La Rue company in the US and Great Britian, is valued at just 2 tenths of one cent today. The US treasury has a strong dinar policy and is working with the CPA (Coalition Provisional Authority) to reinstate a strong decentralized banking system in Iraq. By December 2004 there will be six Western Banks in Iraq and six Iraqi Banks outside Iraq in operation. In March Three banks were given licence to operate in Iraq, National Bank of Kuwait, HSBC Bank and Charter bank of England.
duck2000
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Post by duck2000 Wed 03 Jul 2013, 5:42 am

Prior to US occupation, Iraq had a centrally planned economy. Among other things, it prohibited foreign ownership of Iraqi businesses, ran most large industries as state-owned enterprises, and imposed large tariffs to keep out foreign goods.[4] After the U.S. military came in and took over Iraq, the CPA quickly began issuing many binding orders privatizing Iraq's economy and opening it up to foreign investment. CPA Order 39, entitled "Foreign Investment", provided that "A foreign investor shall be entitled to make foreign investments in Iraq on terms no less favorable than those applicable to an Iraqi investor," and that "[t]he amount of foreign participation in newly formed or existing business entities in Iraq shall not be limited...." Additionally, the foreign investor "shall be authorized to... transfer abroad without delay all funds associated with its foreign investment, including shares or profits and dividends...."

http://en.wikipedia.org/wiki/Coalition_Provisional_Authority

http://www.iraqcoalition.org/regulations/20031220_CPAORD_39_Foreign_Investment_.pdf
duck2000
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Post by duck2000 Wed 03 Jul 2013, 5:46 am

being as this was clearly set up to be an investment and not just a currency exchange rate and gain.. capital gains does apply!

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