Iraqui Currency Investment

The Iraqui Currency
Revaluation Scheme

I've been getting questions from people who want my help in finding a way to avoid or at least to minimize an expected gain of millions of dollars from an investment in Iraqi Dinars.

It might be a stretch to call this a scam, because I haven't found any indication that it is illegal -- other than the possible violation of some SEC rules about the unregistered sale of securities in the U.S.

However, there are an abundance of web sites that do claim this "investment" is a scam or at least that it's an extremely high risk speculation.

I hate to charge people for a tax consultation involving someting that looks and feels like a scam. Also, the tax issues are relatively simple.

So there is some good news and some bad news in terms of the U.S. tax laws as they apply to an investment in a foreign currency.

The good news is that if the investment proves to be profitable, it will be treated as a capital gain. If the currency has been held for more than 12 months, it will be taxed as a long term capital gain on which the maximum rate of tax is 15% for 2011 and 2012. That rate is scheduled to revert to a maximum rate of 20% after 2012 unless the law is changed before then.

The bad news is that if the investment goes south and the investor loses all or most of his investment, it will be treated as a capital loss. That means there are severe limits to the amount that can be deducted from income other than capital gains. Capital losses can be deducted without limit against any capital gains from any other investments. To the extent that there are no capital gains or that all gains in the same year have been offset with losses, up to $3,000 of excess losses can be deducted against other income.

In addition, the U.S. tax law requires that there is a "disposition" of an investment in order to claim a loss deduction. In simple terms that means the investor must find a buyer for the Dinars that have been acquired. If there are no documented buyers, investors can run into a nasty problem in which the IRS would deny any loss deduction.

Some of the people who send me emails asking for advice about avoiding taxes on an expected windfall are hoping that I can pull some kind of tax rabbit out of the proverbial top hat and eliminate the tax entirely. I can only say that I know of no legal way to do that. For a variety of reasons, a foreign corporation, foreign limited liability company or foreign trust will not help to reduce the tax on gains from investments in foreign currencies.

For a LOT more information about this investment, enter the words "Iraqui Dinar scam" in a major search engine.

Vern Jacobs
January 24, 2011

As required by U.S. Treasury Regulations governing tax practitioners, any written tax advice contained herein cannot be used by any taxpayer for the purpose of avoiding certain tax penalties that may be imposed under the Internal Revenue Code. For further details see http://www.offshorepress.com/vkjcpa/disclosurerules.htm

Return to Offshore Home Page