@ThomasM125 , I recognize that it is the intention that is important however, unless there is contemporaneous documents / proof to show that the intention here was indeed to use this bank account as investment , this will not stand an audit. During my professional days , if I had such a case I would have given the client the facts as they stand but would not have suggested treating this as capital/investment asset ( absent any documentary or other evidence to the contrary) mostly because under the IRS rules ( of advice and assertion and subscribing to section 230 ) there would be less than likely chance of sustaining an audit. I still believe this to be the case but of course it is the poster's choice as to the treatment of the gains/losses.
A second point that poster talks about is being taxed on 20% local currency gain and 10% loss on exchange back to dollars and there fore it is unfair ---- since interests earned are recognized in US$ at the time of earnings, I see really no loss -- just less interest earnings and therefore taxes ONLY on the US$ based earnings. Also if there are fees involved in the conversion these are costs against the earnings -- that also should ameliorate the bite -- this is of course assuming non-capital / investment type of account.
I rest -- enough has been covered in this discussion
