Foreign Currency Loss - Section 988

[tracadero]

Hello,

I have seached the discussion boards, but after reading several questions/answers I am more confused about my certain situation.

I am a permanent resident in the US and I had a bank account in a foreign country which I've opened a very long time ago while I was living there. Then I have moved to the US and left the money in that country with the expectation that it would appreciate against USD. I reported that bank account in my taxes and FBAR every year.

While expecting appreciation, unfortunately, the opposite happened especially with the devaluation and turmoil in that country in 2021. In June 2021, I converted all my money in that foreign bank account to USD and transferred it to the USA. Between January 2021 and June 2021, the direct loss is 100,000 USD. Can I deduct this from my taxes in the US?  Can this be considered as a section 988 transaction?

Regards,

Tracadero

[Mike9241]

yours is not a section 988 loss. it's personal nondeductible

(1)Section 988 transaction
(A)In general
The term “section 988 transaction” means any transaction described in subparagraph (B) if the amount which the taxpayer is entitled to receive (or is required to pay) by reason of such transaction—
(i)is denominated in terms of a nonfunctional currency, or
(ii)is determined by reference to the value of 1 or more nonfunctional currencies.
(B)Description of transactions
For purposes of subparagraph (A), the following transactions are described in this subparagraph:
(i)The acquisition of a debt instrument or becoming the obligor under a debt instrument.
(ii)Accruing (or otherwise taking into account) for purposes of this subtitle any item of expense or gross income or receipts which is to be paid or received after the date on which so accrued or taken into account.
(iii)Entering into or acquiring any forward contract, futures contract, option, or similar financial instrument.
The Secretary may prescribe regulations excluding from the application of clause (ii) any class of items the taking into account of which is not necessary to carry out the purposes of this section by reason of the small amounts or short periods involved, or otherwise.

[tracadero]

Thanks. The foreign currency was under a savings account which can be considered as an investment. I have heard that, it comes down to the intent of the individual. If I could demonstrate that I held the funds overseas as an investment, with the believe that it would appreciate in value because of currency fluctuations, then I would have a valid argument that he owned a traditional investment and lost money when I  disposed of it. If this is true, then one would think a loss deduction under 988 would be allowable. Would you agree with this?