GLOSSARY · VISA-HOLDER FINANCE
Cost basis in a foreign currency
For a US taxpayer, the gain on property bought and sold in another currency is figured in dollars: the cost at the exchange rate on the date of purchase and the sale price at the rate on the date of sale. When the foreign currency falls against the dollar between the two dates, the dollar gain is smaller than the gain in that currency and can be a loss; when it rises, the dollar gain is larger.
Also called: exchange rate on each date, historical exchange rate basis, gain in dollars on foreign property
FORMULA
Dollar gain = sale price ÷ sale-date rate − cost ÷ purchase-date rate, with each rate in foreign currency per dollar
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CHAPTER · TWO-COUNTRY MONEY · FOUNDATIONSIndian Funds and Shares for a US TaxpayerCHAPTER · TAXES ON BOTH SIDES · STRATEGIESIndian Property: Buying, Renting and SellingRELATED TERMS
SOURCES
- Foreign currency and currency exchange rates. Internal Revenue Service.
- Quijano v. United States, 93 F.3d 26 (1st Cir. 1996), applying Rev. Rul. 54-105. U.S. Court of Appeals for the First Circuit.