Iraqi Dinar Investing Does Not Trigger IRS Personal-Use Rules

Iraqi Dinar Investing Does Not Trigger IRS Personal-Use Rules


Sep 21, 2011 @ 9:35 AM




Robert A. Green, CPA,Contributor


Iraqi dinar


My recent blog, “Is The Iraqi Dinar Worthless Paper Or Maker Of Millionaires?” generated a firestorm of comments and opposing views. Here are some additional tax answers to questions and comments made.

Various IRS publications discuss tax rules for physically-held currency held for personal-use, mentioning capital gains treatment on gains, and no tax-deductible loss (capital or otherwise) on personal-use losses.  These are standard tax rules for personal-use property. Taxpayers may only deduct capital losses on investment (Section 212) or trade or business (section 162) property.

Taxpayers who purchase Iraqi dinars generally are buying dinars for investment purposes, not personal-use. An example of personal use would be buying euros to use while traveling in Europe for personal reasons.

When it comes to physically-held currency and forex transactions (spot and forward) held for investment or business use, Section 988 (foreign currency transaction) tax rules apply.

Section 988 is ordinary gain or loss tax treatment. Good news, the capital loss limitation of $3,000 per year does not apply to Section 988 ordinary losses.

An investor holding forex as a capital asset may file a contemporaneous election to opt-out of Section 988 into capital gains and loss rules, otherwise known as the capital gains election. But if you invest in physically-held currency, Section 988 does not permit you to opt-out of Section 988.


In summary, if you heard from an accountant, the IRS or a friend that capital gains apply by default to physically-held currency, that answer is only correct for personal-use sales of physically-held currency. It’s incorrect for the sale of physically-held currency or forex held for investment or business purposes. And don’t forget, you can’t take a tax loss of any kind (capital or ordinary) on the sale of personal-use physically-held currency either.

http://www.forbes.com/sites/greatspeculations/2011/09/21/iraqi-dinar-investing-does-not-trigger-irs-personal-use-rules/

So Mr. Green is telling us that our "investment" of Dinar is taxable under the capital gains(loss) requirements of the IRS Code.  Interesting.  That being the case then all of the hubbub about O holding back the RV due to his wanting to get a "tax" on our so called investment was BALDERDASH.

Thank you, that cleared that up for us.  It also puts to rest the argument of whether we get taxed or not.  NO sweat, AIpersonally have no problem paying taxes, as long as it applies to everyone to include the so called" representatives" of the people non other than the Enate and the House of Representatives members.  Since they conveniently seem to pass laws that keeps them sererate3 from WE THE PEOPLE one only hopes that for a change they have to comply equally with the rest of us.  Since they have no shame why should they be different?

Actually I think it was rather the opposite. He was saying that if you hold physical cash for investment purposes it is considered ordinary gain or loss for taxes, not capital gains.

Regardless, talk about O holding things off so he can charge more taxes is pure balderdash, Constitutionally, any taxation has to originate in the house.

Yea, that was my point in mentioning it was balderdash.  Just more 'roo smelly stuff.

As to whether it is or isn't capital gains or not I would think that if it was taxed as general income it would not be regarded as any gain just income.  Since I am not a CPA and I hire one to do my taxes I will, if ever necessary in the next millennium, let him handle it as appropriate.  Besides if this does happen I will be so overwhelmed by the event having befom reality that I will undoubtedly need more than a CPA to deal with the financial realization.