William Posted March 30, 2008 Report Posted March 30, 2008 I have a client who bot a camping lot on the Great Lakes in Canada. In Canadian dollars he lost money but in US dollars he made money. He sold in 2007. Do you calculate the loss in Canadian dollars and convert the loss into US dollars for tax purposes or do you calculate the gain using US dollars and show that on his return?. The devaluation of the US dollar has caused this scenario. I imagine that if he had a gain, he would have to file a Canadian return and pay tax to Canada and then bring the gain to the US return and take a foreign tax credit. Therefore, I am leaning towards calculating the loss in Canadian Dollars and converting the loss to US dollars for the return but I am concerned that I may be wrong and I don't want to not report the gain. Essentially, he lost 500 in Canadian dollars but brought back $10,000 more US dollars upon the sale due to the change in exchange rates. I would appreciate any help and a pub reference if possible. Quote
RoyDaleOne Posted March 30, 2008 Report Posted March 30, 2008 If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U.S. currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Pub 519 Quote
William Posted March 30, 2008 Author Report Posted March 30, 2008 If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U.S. currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Pub 519 My reseach notes "as a general rule, a gain on the sale of 'personal property' is US source income if the taxpayer is a U.S. resident and foreign-source income if the taxpayer is a nonresident." It further says "a gain on the sale of exchange of a US reap property interest is U.S. source income, whereas a gain on the sale or exchange of real property located abroad is foreign-source income. All other factors, including where the selling activities took place, are ignored. Pub 519 did not speak to foreign real estate owned by a US citizen. I am not convinced just yet but I sincerely thank you for your response. Quote
RoyDaleOne Posted March 30, 2008 Report Posted March 30, 2008 http://www.cra-arc.gc.ca/E/pub/tp/ic72-17r5/ic72-17r5-e.pdf See Section Code 988 and related Sections and Regulations thereunder. Quote
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