Since I spoke to you last, I did find this interesting reference that may not be favorable to you. Here is a post i gave to a previous poster.
Actually what it says in this post is:
Coordination with section 988(c)(1)(C)(ii). No exchange gain or loss is recognized with respect to the following transactions -.
(A) An exchange of units of nonfunctional currency for different units of the same nonfunctional currency;
(B) The deposit of nonfunctional currency in a demand or time deposit or similar instrument (including a certificate of deposit) issued by a bank or other financial institution if such instrument is denominated in such currency. This is referring to conversion losses.
Thus gains or losses are not recognized in Section 988 transactions.
This subject is not as clear-cut as you might think. Because of the information discrepancies, I cannot concur with you but if you pursue claiming a loss, you have my blessing. Be sure you can back up your position if you are examined by the IRS. This is a gray area that is open to interpretation and tax experts may have differing opinions on the matter.
@rset
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