capital gains tax on exchange gains

[Captain Oates 911]

I discovered today both Canada and Australia have weird tax laws that say if a resident has foreign bank accounts, then these must be revalued and any exchange gain is taxable. Exchange losses can only be set against gains

The UK does not have this law and moving funds between accounts or having foreign accounts does not constitute a taxable event

I am a UK citizen, US resident and I declare my UK bank accounts to the US treasury and declare and pay tax on the interest earned at the official exchange rate each year to the IRS

I would like to be sure that the US does not tax exchange gains on bank account principal.

I moved my US dollars to the UK in Spring as I was having a wobbly. I moved it back recently and accidentally made an exchange profit of over $200k

Does anyone know of any US tax regs that would tax the fluctuating value of foreign bank accounts ?

There were no contracts etc involved, just moving funds about from one pocket to another

Edited August 26, 2009 by saywhat

[anitacastillo 0]

$200,000 is a lot of exchange gain to make accidentally.

I suggest you get in touch with a CPA or EA (enrolled agent) - who has experience with foreign taxation issues, in the US. There are tax treaties between US and UK which may impact this as well.

[AbbynSheryl 0]

congrats

time to celebrate

have a drink

abby n sheryl

[Captain Oates 911]

$200,000 is a lot of exchange gain to make accidentally.

I suggest you get in touch with a CPA or EA (enrolled agent) - who has experience with foreign taxation issues, in the US. There are tax treaties between US and UK which may impact this as well.

It's getting really weird

I just called the IRS and 2 different agents said that moving my money from one account to another and getting an exchange rate gain/loss is not a taxable event

The first agent said I needed a form to say I had moved anything over 10k. I said isnt that just for airports and cash - no

The second agent said the 10k report was only for physical stuff like cash/bonds/checks because wire transfers all go through the FED anyway

So they are saying not a taxable event but I have been on the net looking at these tax experts and some say it's not taxable and some say it's income taxable and some say it's capital taxable and the 2 at the irs say it's not taxable at all

Obviously going to an expert is not a certainty either

The one at the IRS asked me where I got the money and I said 40 years of work in the UK - its my life savings. She said I might have to pay tax on the wages back for 40 years before I emigrated. When I heard that I lost all confidence in what they were saying

So - confused ! Going to a CPA could well be a waste as they all say different

Edited August 26, 2009 by saywhat

[JimVaPhuong 4,863]

$200,000 is a lot of exchange gain to make accidentally.

I suggest you get in touch with a CPA or EA (enrolled agent) - who has experience with foreign taxation issues, in the US. There are tax treaties between US and UK which may impact this as well.

It's getting really weird

I just called the IRS and 2 different agents said that moving my money from one account to another and getting an exchange rate gain/loss is not a taxable event

The first agent said I needed a form to say I had moved anything over 10k. I said isnt that just for airports and cash - no

The second agent said the 10k report was only for physical stuff like cash/bonds/checks because wire transfers all go through the FED anyway

So they are saying not a taxable event but I have been on the net looking at these tax experts and some say it's not taxable and some say it's income taxable and some say it's capital taxable and the 2 at the irs say it's not taxable at all

Obviously going to an expert is not a certainty either

The one at the IRS asked me where I got the money and I said 40 years of work in the UK - its my life savings. She said I might have to pay tax on the wages back for 40 years before I emigrated. When I heard that I lost all confidence in what they were saying

So - confused ! Going to a CPA could well be a waste as they all say different

The problem is you're asking questions from people who don't have your entire financial situation documented in front of them. That said, even a CPA with access to all of your financial records can still screw up. US tax law is unbelievably complicated.

I'd still consult with a good tax accountant.

[Matt & Bing 56]

$200,000 is a lot of exchange gain to make accidentally.

I suggest you get in touch with a CPA or EA (enrolled agent) - who has experience with foreign taxation issues, in the US. There are tax treaties between US and UK which may impact this as well.

It's getting really weird

I just called the IRS and 2 different agents said that moving my money from one account to another and getting an exchange rate gain/loss is not a taxable event

The first agent said I needed a form to say I had moved anything over 10k. I said isnt that just for airports and cash - no

The second agent said the 10k report was only for physical stuff like cash/bonds/checks because wire transfers all go through the FED anyway

So they are saying not a taxable event but I have been on the net looking at these tax experts and some say it's not taxable and some say it's income taxable and some say it's capital taxable and the 2 at the irs say it's not taxable at all

Obviously going to an expert is not a certainty either

The one at the IRS asked me where I got the money and I said 40 years of work in the UK - its my life savings. She said I might have to pay tax on the wages back for 40 years before I emigrated. When I heard that I lost all confidence in what they were saying

So - confused ! Going to a CPA could well be a waste as they all say different

The problem is you're asking questions from people who don't have your entire financial situation documented in front of them. That said, even a CPA with access to all of your financial records can still screw up. US tax law is unbelievably complicated.

I'd still consult with a good tax accountant.

Yes I agree. I would find it hard to believe that someone who makes 200k on a foreign exchange gain doesn't already have a tax accountant on call.

[Captain Oates 911]

$200,000 is a lot of exchange gain to make accidentally.

I suggest you get in touch with a CPA or EA (enrolled agent) - who has experience with foreign taxation issues, in the US. There are tax treaties between US and UK which may impact this as well.

It's getting really weird

I just called the IRS and 2 different agents said that moving my money from one account to another and getting an exchange rate gain/loss is not a taxable event

The first agent said I needed a form to say I had moved anything over 10k. I said isn't that just for airports and cash - no

The second agent said the 10k report was only for physical stuff like cash/bonds/checks because wire transfers all go through the FED anyway

So they are saying not a taxable event but I have been on the net looking at these tax experts and some say it's not taxable and some say it's income taxable and some say it's capital taxable and the 2 at the IRS say it's not taxable at all

Obviously going to an expert is not a certainty either

The one at the IRS asked me where I got the money and I said 40 years of work in the UK - its my life savings. She said I might have to pay tax on the wages back for 40 years before I emigrated. When I heard that I lost all confidence in what they were saying

So - confused ! Going to a CPA could well be a waste as they all say different

The problem is you're asking questions from people who don't have your entire financial situation documented in front of them. That said, even a CPA with access to all of your financial records can still screw up. US tax law is unbelievably complicated.

I'd still consult with a good tax accountant.

Yes I agree but what is a good one - these tax experts on line claim 30 years international experience and they reply differently to every person who posts with a similar issue

If I go to a tax expert in Seattle, I just would not have confidence in their advice - if I go to two and they give different advice, which is right

If I go to 3 and 2 say one thing and one says another, do I go with the majority

The Australian and Canadian position is clear - value your foreign bank account at the exchange rate on the day you emigrated and then pay tax or get relief according to how the exchange moved during the year whether you move money or not

If there was a similar provision in US taxes, it would be all over VJ and the ex pat sites and I have never seen it brought up in the last 3 or 4 years so I reckon it's not the same as Australia/Canada

Just coz the US is not as draconian doesn't mean there isn't something ready to catch me out

I like to get my taxes right to the cent. I am retired and I spend weeks getting my taxes spot on

But this worries me. I am sure it wouldn't arise unless I was audited as there is no bank certificate or broker certificate to show theses gains/losses

If I were more relaxed about this I would just ignore it - but these are big figures and I don't want to end up doing an Al Capone.

When I mail the forms to the treasury each year to show my foreign bank accounts, I keep a proof of mailing as the dollar penalties can be massive plus 10 years in jail - and they dont even mail a receipt !

The reason I have posted on here is to find out if someone else has had experience of keeping a bank account 'back home' and what they were able to find out.

Many times the actual experiences of people on VJ /ex pat sites are better than qualified opinion

[Captain Oates 911]

PS

I am a fully qualified English accountant myself - that's why I don't trust us.

In the words of Steve Martin in 'The man with two brains' - 'We Doctors should only accept the death of a patient when it's caused by our own incompetence'