Thanks so much for your detailed response!
A few things that aren't 100% clear to me:
In section 988 2 B that you showed, it says the personal transaction exception doesn't apply if the gain on the transaction exceeds $200. Would a loss of -$400 count here? Or the exception can only apply to gains, not to losses? If so that's kind of unfair no, that large gains get taxed, but large losses don't help in the other direction?
If I buy foreign currency explicitly with the hope that it will increase in value and then sell it, I guess that would be covered by 3B- expense for the production of income, so it wouldn't be considered a personal transaction?
Then what if I decided to hold onto the inherited currency- potentially for years- on the hope it would increase in value?
