This is a foreign exchange conversion loss. The loss was incurred by Fox rate variation from the date the loan was advanced to the date when the loan was repaid. What tax forms do I use.
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If you are actually charging interest to your relative, and reporting the income as taxable income, then you can subtract your foreign-exchange costs from the interest that you received. In other words, if you lent $1000, and you received $1100 less a $50 exchange fee, then you would report $50 of interest income. You can't deduct the exchange fee, because you can't subtract income that you never received. You simply report less income from the loan.
If you are actually charging interest to your relative, and reporting the income as taxable income, then you can subtract your foreign-exchange costs from the interest that you received. In other words, if you lent $1000, and you received $1100 less a $50 exchange fee, then you would report $50 of interest income. You can't deduct the exchange fee, because you can't subtract income that you never received. You simply report less income from the loan.
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