Foreign Translation

#3 08-20-2008, 12:30 AM

On Aug 19, 8:46 am, Alan <sfcnm-...[at]yahoo.com> wrote:

- quote -

> The rule requires that you use an exchange rate that does not
> distort income. Using an end of year rate (assuming it differed
> from the rate used when paid) would distort income. A yearly
> average rate would not distort income if one earned the foreign
> wages on a fairly constant level during the year. Ditto for a
> monthly average if earned equally in a month. If one earned the
> income unevenly, then one could not use a yearly average. The
> obvious best answer is to use the rate that existed at the time
> of each payment.

So suppose you received dividend payments equally through the year, or
for that matter a salary every month. You could convert to US dollars
using the average rate for the year, or track the actual dollar amount
as each dividend/salary is received, and then choose the method which
results in a lower US dollar income.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#2 08-20-2008, 12:27 AM

On Aug 19, 8:46 am, Alan <sfcnm-...[at]yahoo.com> wrote:

- quote -

> The rule requires that you use an exchange rate that does not
> distort income. Using an end of year rate (assuming it differed
> from the rate used when paid) would distort income. A yearly
> average rate would not distort income if one earned the foreign
> wages on a fairly constant level during the year. Ditto for a
> monthly average if earned equally in a month. If one earned the
> income unevenly, then one could not use a yearly average. The
> obvious best answer is to use the rate that existed at the time
> of each payment.

- quote -

> FX rates can be found athttp://www.oanda.com/convert/fxhistory

I've used that website, but then filed an amended return to use the
the typical cash rate (which is the interbank rate + 4%), which
reduces the dollar amount of dividends, interest payments, etc. This
accurately reflects the exchange rate I actually get when I convert my
money to US dollars to pay taxes. It may not reduce the capital gain
though.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#1 08-19-2008, 08:26 PM

On Aug 19, 11:46*am, Alan <sfcnm-...[at]yahoo.com> wrote:
- quote -

> Pats Fan wrote:
> > If a US citizen earns foreign wages, those wages of course must be
> > converted to US dollars when using the Form 1116.
> > Can one use either the average of the conversion rate over the year,
> > or the year end one, depending on which is more beneficial?
> > Thanks.
> The rule requires that you use an exchange rate that does not
> distort income. Using an end of year rate (assuming it differed
> from the rate used when paid) would distort income. *A yearly
> average rate would not distort income if one earned the foreign
> wages on a fairly constant level during the year. Ditto for a
> monthly average if earned equally in a month. If one earned the
> income unevenly, then one could not use a yearly average. The
> obvious best answer is to use the rate that existed at the time
> of each payment.
> FX rates can be found athttp://www.oanda.com/convert/fxhistory

Makes sense, Alan, thank you.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

08-19-2008, 03:46 PM

Pats Fan wrote:
- quote -

> If a US citizen earns foreign wages, those wages of course must be
> converted to US dollars when using the Form 1116.
> Can one use either the average of the conversion rate over the year,
> or the year end one, depending on which is more beneficial?
> Thanks.
The rule requires that you use an exchange rate that does not

distort income. Using an end of year rate (assuming it differed
from the rate used when paid) would distort income. A yearly
average rate would not distort income if one earned the foreign
wages on a fairly constant level during the year. Ditto for a
monthly average if earned equally in a month. If one earned the
income unevenly, then one could not use a yearly average. The
obvious best answer is to use the rate that existed at the time
of each payment.

FX rates can be found at http://www.oanda.com/convert/fxhistory

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#-1 08-19-2008, 02:32 PM

If a US citizen earns foreign wages, those wages of course must be
converted to US dollars when using the Form 1116.
Can one use either the average of the conversion rate over the year,
or the year end one, depending on which is more beneficial?
Thanks.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

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