Question for the Money Doctors
Question submitted on Apr 14, 2022.
QuestionDoes a transfer of cash from a canada bank to a united states bank result in a foreign currency exchange loss transaction that would be considered a section 988 capital loss...and be reported on IRS form 8949?
If you are transferring money from your Canadian bank account to your US bank account, there is generally no tax consequence because you are moving your own money from one account to another. You will not realize gains or losses as the currency exchange rates fluctuate.
However, if you use foreign currency to buy assets, that cost basis is fixed at the time of purchase, although the value may be different at a later date.
However, if you engage in currency trading, that may generate capital gains and losses that is reported on IRS Form 8949. Currency values fluctuate due to changing exchange rates between currencies of different countries. The tax rules can be quite complicated and I suggest studying this carefully before venturing into currency trading.
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