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Section 988 Currency Devaluation from Britain to Australia

foreign corporation, IRS audit, saving taxes, how do I save taxes, tax planning

Tax planning for currency exchanges.

 Folks have been calling about Section 988 currency devaluation taxation. Seems like I am getting a call every day on U.S. taxation of home loans in foreign (non-U.S.) currencies.

As a foreign currency drops in value, the value of a debt (in U.S. dollars) decreases and the IRS wants to tax this windfall.

For example, I owe you 1 (one) British pounds.  When I made the loan, the one pound cost a U.S.$1.50.  

Now, the pound is worth $1.00.  So, I only have to spend a dollar to pay you back.  The IRS issued a ruling (which is merely an opinion), that repayment of the loan creates $.50 in taxable income.
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