I have accrued some interest on my foreign bank fixed deposit (FD). This is a savings investment vehicle like a CD. Want to understand how to report interest for IRS this year. As an example, if I invested $100 a year back, earned $20 interest but let's say due to currency exchange losses my $100 principal is now effectively $90. I have 2 options, which one should I do:
1. Report interest of $10 as that is effectively what I made as interest after addressing the currency devaluation.
2. Report interest of $20 but then report a currency loss of $10 in Schedule D (as it is an investment not a personal thing).
What is the right answer here?
Thanks in advance for the help!
