the issue is that this would be covered by IRC section 988
(2)Exclusion for certain personal transactions
If—
(A)nonfunctional currency (the canadian $) is disposed of by an individual in any transaction, and
(B)such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by reason of changes in exchange rates after such currency was acquired by such individual and before such disposition. The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.
(3)Personal transactions
For purposes of this subsection, the term “personal transaction” means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of—
(A)section 162 - trade or business expenses (other than traveling expenses described in subsection (a)(2) thereof), or
(B)section 212 (expenses for the production of income) (other than that part of section 212 dealing with
expenses incurred in connection with taxes).
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so if the exclusion rule doesn't apply then section 988 covers the reporting
(1)Treatment as ordinary income or loss
(A)In general
Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).
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(b)Foreign currency gain or loss
For purposes of this section—
(1)Foreign currency gain
The term “foreign currency gain” means any gain from a section 988 transaction to the extent such gain does not exceed gain realized by reason of changes in exchange rates on or after the booking date and before the payment date.
(2)Foreign currency loss
The term “foreign currency loss” means any loss from a section 988 transaction to the extent such loss does not exceed the loss realized by reason of changes in exchange rates on or after the booking date and before the payment date.
booking date would be the date of inheritance 1/1/2024 (valuation using spot rate)
payment date would be the date of sale 5/1/2024
in other words, gains/losses attributable to exchange rate fluctuation is ordinary income/loss not capital gain/loss.
