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by michael_vo 1185 days ago
If you just exchange usd for euro that’s not an expectation of profit per se. And no one is taxed for this action.

If you’re a day trader of forex usually at the end of the day you would settle back into your default currency. Your gains from this is taxed. But usually when doing this you’re buying derivative products that are explicitly securities with maturity dates.
2 comments
lrvick 1185 days ago
If you are buying euros as a hedge against USD inflation then you are expecting a potential of profit, or at least lowering losses.

Same with precious metals, or Bitcoin.

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michael_vo 1185 days ago
I agree if it’s part of your investment portfolio. The profit part comes when you cash it back into your default currency in order to use it or to realize the gains.

If you bought btc, used it to buy goods, and never cashed it back to usd then I think it is a currency.

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charcircuit 1185 days ago
You realize gains when you use another currency to buy something. So if you exchange USD for Euro and then the price of Euro goes up by 5% then when you buy a sandwhich with that money you have to pay taxes on 5% of the price of that sandwhich. Unless you convert your USD to Euro at the time of the transaction buying things with euro can turn into a tax nightmare since you have to keep track of the exact time you purchase something to know the exact exchange rate.

If this wasn't the case you could just avoid capital gains by buying something with eulos and reselling it for usd with no profit.

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Xorakios 1183 days ago
In the US the taxable event generally occurs when one currency is converted back to USD, not when a non-USD currency is spent. Real-time conversions do occur and you are absolutely correct it can turn into a tax nightmare when traveling :(
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Xorakios 1183 days ago
That is not accurate. If a US citizen buys, for example, an extra $1000 in euros that are not spent, and the exchange rate changes, it is a taxable event.

The specific line item is on Form 8949, to report gains from foreign currency exchange transactions, Part I and it absolutely applies to vacation travelers, not just FOREX investors.

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