Right exchange rate for currency conversion for capital gain by selling the foreign inherited house?

[hp100]

I used the exchange rate on the end of the year for filing FORM 3520, 8938, FBR.

When I sell the house, can use the exchange rate on the day of the year for the Basis as used in Form 8938 and the exchange rate on the day of sale to calculate the capital gain ? 

[pk]

@hp100 , from your post what I get is   (a) you had acquired a foreign capital asset ( probably a residence )-- it is not clear  how you acquired it -- a gift, inheritance, purchase or some other type of transaction;  (b)  you have disposed off the property ( house? ) at a gain;  (c) you used the  end-of-the year exchange rate to convert  these tranasactiosn amounts to US dollars  for purposes of reporting  FATCA ( 8938), 8939 ( capital gain)-- schedule-D etc. ;  FBAR ( form 114 at BSA-e filing / FinCen.gov ) and a 3520  ( why  ? )

What is the question  that you have .  Also please  provide more info  including acquisition date, how acquired, how was the basis determined; when disposed off and  of course the country concerned.   I am assuming  here that you are US citizen/Resident.

[npierson7]

Yes, that is correct. You must use the exchange rate on the day of sale to calculate your capital gain.

[hp100]

Per FBR, 3520, 8938, the exchange rate is used by the end of the year (Dec 31th).  I inherited the house, mother passed away on 4/27.  Actual acquisition date (legal) is 9/8.  I use the exchange rate of Dec 31 for FBAR, 3520, 8938.  For the long term capital gain, I use the exchange rate of 9/8 for the Basis.  I use the appraisal value on 9/2.

[pk]

@hp100 , Since the FBAR reporting is based on the last day of the year, using the  YE exchange rate should not pose an issue .    The basis of the  inherited property is generally based on FMV at the time of death of the decadent or soon thereafter and so  using the FMV  on 09/02 is  close enough. From your post it sounds like there was an estate established ( probably with pour-over from the trust) and therefore  the transfer of the house was recorded to you on 09/08.  Assuming that all these  are during the year 2020 and you sold the property during the year, the  gain seems a bit surprising.   If indeed this is the case and true then the establishment of basis  on 09/02 would become suspect ---  5 months after death ( generally basis is assumed to move rather slowly).

Because this is a distribution from an estate there may be no requirement for  the form 3520 but  I do not know the whole scenario, nor do I know the country.

As far as the exchange rates used , it should pose no issue -- generally one uses the dollar of the day either market or what your bank gave  you.  Keep good records in order to sustain an audit (if)

[jrandomwinner]

From the Instructions for Form 8938, page 8:  "Use the currency exchange rate on the last day of the tax year"... "even if you sold or otherwise disposed of the specified foreign financial asset before the last day of the tax year."   The instructions say to use the "Treasury Reporting Rates of Exchange" webpage to get applicable rates.  Form 8938 is an IRS form. 

Form 3520 doesn't appear to specify what rate.  It is a report to Treasury, so it appears that the Treasury Reporting Rates can be used. 

These are informational forms not tax forms.  The gov't is interested in making sure US persons are not able to hide assets abroad without penalty.