How can I report foreign currency loss on my fixed income accounts in another country?

[itsdhiraj]

I have had many Fixed deposit accounts in India during a period of last 10 years and have been reporting them as interest income on my tax returns and also FBAR. this year I broke those CDs and brought the money over to US. However due to the currency devaluations, I have lost money. 

How do I report that over on the tax return?

[tagteam]

@pk

[pk · Accepted solution]

@itsdhiraj , assuming that you a US person ( citizen / GreenCard / Resident ) and with tax home in the USA, your functional currency is considered to be US$ and unless you are a business entity , generally currency losses are  not recognizable  ( not even under casualty losses because it is not usually an unforeseen  event ).

Please read 26 USC 988 where these are dealt with.  With very low probability of success, one could argue that a CD for a fixed time, is a forward looking contract  ( only because the contract was in a non-functional currency  and the risk should have been known ).

Sorry I could not give you good news.

Is there more I can do for you ?

Namaste ji

pk