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I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a
by cwkoss 7y ago
I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services.
Am I wrong? Have never held any significant amount of foreign currency, so have never dealt with this personally.
- paulddraper 7y agoMy understanding is that a gain or loss in that currency is recognized upon spending/trading it. Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactions-taxation.htm https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that. Like use tax, I suspect it is often just neglected.
- cwkoss 7y agoInteresting, thanks for correcting me. It looks like there may be an exemption for small amounts under $200 (https://smallbusiness.chron.com/foreign-currency-exchange-tax-issues-77894.html https://smallbusiness.chron.com/foreign-currency-exchange-ta...), which would make Bitcoin much more functional (if it would apply to Bitcoin anyways, mute point as BTC is classified as an asset), but not to the extent of my misconception.
- xur17 7y agoThe lack of a de minimis exemption for bitcoin is key here, and a major way in which it's not treated like a foreign currency.
- solotronics 7y agoYeah there is specific tax code for gains on foreign currency. It is actually worse than capital gains tax. https://smallbusiness.chron.com/irs-tax-laws-regarding-foreign-currency-81346.html https://smallbusiness.chron.com/irs-tax-laws-regarding-forei...