Home
Tax Articles
Tax FAQ
Introducing Our Firm
Our Services
Real Estate Taxletter
Need Help?
Other Websites
Site Map

Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+

What exchange rate do I use to convert money earned on a foreign residence?

August 12, 2011


From:  Milo
Date:  24 Jan 2009

Hi, I have a question concerning the sale of a foreign real estate property.

I am selling some real estate located outside the United States. I have to convert the sales price to U.S. dollars for U.S. tax reporting, but Iím not sure what foreign exchange rate to apply.

Several IRS publications refer to the contract date. When I signed the contract of sale, I became legally bound to sell the property at the specified amount within a specified date. I decided to sell and signed the contract based on the prevailing exchange rate on that day and think that I should use that exchange rate to calculate the U.S. dollar equivalent of the sale price. Actual closing occurred on the date specified in the contract.

I wasnít able to find any specific reference in the IRS publication and U.S. tax code. Do you think my approach is legitimate and sustainable?

Milo

Answer

Date:  6 Feb 2009

Hello Milo,

This is a more difficult question than you might think.

I wasnít able to find a reference specifically on point.

If the sale did not relate to a trade or business, the closest I could find was Revenue Ruling 1954-105, which specifically applies to sales of personal property, such as a watch, automobile or jewelry. According to that ruling, you would use the exchange rate prevailing on the date of the sale. Applying this theory to real estate, that would be the closing date. I think that makes sense, because thatís the date you have control of the funds.

Since I havenít found any other reference, I canít say your conclusion is wrong. I just feel more confident with my conclusion.

In the trade or business context, Internal Revenue Code Section 988 outlines the rules for foreign currency transactions. Itís pretty involved, so Iím not going to explain it in detail.

Since Iím not an expert in this area, you might want to consult with one.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

What exchange rate do I use to convert money earned on a foreign residence?

Home | Real Estate Taxletter | Articles | FAQ | Introducing Michael Gray, CPA | Need Help? | Other Links


Michael Gray, CPA
2190 Stokes St., Suite 102
San Jose, California 95128-4512
(408) 918-3162
Fax (408) 998-2766
email: mgray@taxtrimmers.com
© 2016
Subscribe to
Michael Gray, CPA's
Real Estate Tax Letter
!

subscribe
unsubscribe