Opened foreign CD in 2015 initial investment is $10000 which is converted to foreign currency (50 rupees per 1 USD). So, it is 500000Rupees.
Been paying tax for yearly interest after converting the earned interest into $.
Repatriated in 2017 but only got back $9000 after converting the rupees back into dollars.
With above example, how can one show the loss of $1000? Also, the yearly interest (for which tax is being paid annually) is already included in the $9000.
You cannot claim a loss due to the conversion rates on a CD/cash.
Flip side of that situation ... if the situation had been reversed and due to the exchange rate you had made $1000 it would not be a taxable event either.
Could you please point to IRS publication clarifying on whether a loss or profit of currency exchange rate can be claimed on the repatriated money or not? --It feels that if the US income tax is paid on the income generated on the fund in the foreign country, claiming the loss on the foreign currency exchange rate looks to be a fair game. Would certainly want to learn more on what IRS says about it.