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I am having issues determining if I need to declare gains or losses on my taxes.

Suppose I had $500 and converted to Brazilian reals at the rate 1 to 2, so R$1000 and with that money I bought some investment X. After a couple of years investment X is worth R$1300 but currency is now 1 to 3, so while I make R$300, when I bring it back to the U.S. I actually have only less than $430.

i.e. I lost in net, but the investment have me positive results in another currency. For taxes, is this a capital loss or a capital gain?

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You should convert all values to US dollars before calculating US taxes. Per the IRS:

You must express the amounts you report on your U.S. tax return in U.S. dollars. Therefore, you must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.

  • Does this also apply to return of capital? – DJohnM Mar 7 '18 at 20:56

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