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We bought a vacation home in the UK in 2006 for 182000 pounds, including purchase price, closing costs and improvements, when the pound was stronger ($1.8/pound), and wired $327000 directly to the UK solicitor.

If we sell the vacation home in 2018 for 182000 pounds, when the rate is $1.3/pound, place the funds into a UK interest-bearing account for several years until the pound improves to $1.5/pound, and return the funds to the US at that time, do we calculate the gain/loss on currency exchange as (182000 x $1.5/pound) - (182000 x $1.8) = $273000 - $327000 for a loss of $54000, or as (182000 x $1.5/pound) - (182000 x $1.3/pound) = $273000 - $237000 for a gain of $36000? In the first case we use the exchange rate of $1.8/pound when we first changed dollars into pounds in 2006. In the second case we use the rate of $1.3/pound when we opened the interest-bearing account in 2018.

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    Are you asking about the UK tax impact or the US tax impact? – Grade 'Eh' Bacon Jun 10 '18 at 18:47
  • For the opposite way around (see this question) there would be a taxable event when you sold (calculated using the 1.8 and 1.3 rates) and potentially a second event when you rehomed the money (using 1.3 and 1.5). Also, is it really the case that the selling price (in £) is the same as you bought it for? I would have expected a higher sale value in many places. – TripeHound Jul 26 '18 at 8:52
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    " for several years until the pound improves to $1.5/pound" for a suitable (ie really big) value of 'several'... – AakashM Jul 26 '18 at 10:42
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    UK house prices have moved significantly upwards in the last 12 years, is that sale price realistic? It will change your question substantially if there's a high enough price gain to outweigh the currency losses. – GS - Apologise to Monica Aug 5 '18 at 11:07
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Judging by this set of stats - https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/february2018 - you could easily recoup your $327,000 basic outlay if you sell in 2018. However, if you're planning to invest the money carefully to maximise any gain, you might be well advised to keep that house over the course of the next year or two, when Brexit - and what it will mean for the UK home-owning fraternity - will very likely see the price of £200,000+ houses rise at least in line with any rise in the pound against the dollar.

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