Hi,
I was looking for clarity on how to recognize losses on a 10-year CD that I had invested in a foreign savings account. The CD was intended to be an investment - no personal transactions have been conducted in the savings account . I paid taxes on accrued interest on the CDs via Schedule B every year.
Say I put in $100 at time 0, and received interest of $8, 9, 10, 11, 12, 13, 14, 15, 16, 17 (totaling $125) in yrs 1..10- so my cost basis is $225. Upon repatriation, because of adverse FX moves, I received , say only $150.
1) Can I take $75 ($150-225) as an ordinary loss as per Section 988? In my view, there is no capital gain/loss involved as the CD par amount was effectively 100 both at time zero and 100 at maturity - so the entire loss is because of forex moves.
2) Do I report this in Other income, Form 1, line 8 in Turbotax? For description, do I just say something like "Foreign exchange losses on 10-year CDs" or need to enter something else?
3) Do I need to attach any other documentation to my return?
Some experts have said that instead of taking 988 losses, I need to use schedule D. Others have said that FX losses on CDs cannot be taken at all because they are personal transactions, not investments.
Even the reply from the FX experts on this forum seems to be different (For instance, see the response https://ttlc.intuit.com/community/taxes/discussion/foreign-currency-loss-section-988/00/2527216 by Mike9241 vs more recently under https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/re-section-988-certif... by DaveF1006)
Mike/Dave, is it possible to give your latest thoughts, and reconcile your views on my query? Thanks for the guidance
