Thank you for the response/explanation. Let's reverse the scenario, though, just in case it makes a difference.
Obviously this is much less likely, but if Juan withdrew $500 CAD and it debited his account $450 USD and then he was able to exchage the $500 CAD for $500 USD upon his return at his local branch, would that $50 gain be reportable as income (and where)? I ask because it's still not "incurred" in a trade or business, and it's still not from a transaction entered into for profit. That having been said, if this wouldn't be reportable, would it be because it wasn't a transaction entered into for profit, or would it be because the dollar amount was below a certain threshold?
Reversing the scenario does make a difference. Although losses are only deductible in one of those three categories, all gains, including those outside these categories are usually taxable. In your case above however, IRC988(e)( 2 )(B) sets a $200 threshold below which the currency exchange gain on personal transactions are ignored. From a practical standpoint, a taxpayer is unlikely to get audited over the taxes on a single $50 unreported gain. Common things that
do cause taxpayers to get audited are tips from ex-wives and ex-employees.
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