IRS Practice Unit: Computation of Exchange Gain or Loss (IRC §988)

Determining appropriate exchange rate used to translate foreign currency amounts, the IRS Large Business and International Concept Unit outlined in a practice unit released May 8. The “appropriate exchange rate” is based on the transaction to be reported on the U.S. federal income tax return. Generally, an item that is recognized as a taxable event at a specific point in time is translated at the foreign currency exchange rate applicable at that specific point in time (e.g., a dividend), also known as the spot rate. However, if the item has occurred over a period of time, it is generally translated ...