Here’s the situation:
1) I bought an asset in dollar terms in the US many years ago, while living in Japan.
2) I sold the asset in 2022 at a loss in dollar terms. I brought the funds from the sale to Japan.
3) Of course I had a profit in yen terms, because I bought the asset when the yen was much stronger. So I paid taxes on this gain in yen terms, due to the foreign exchange difference.
4) Does that count as a foreign exchange gain? Did I owe US taxes on that yen “profit” — even though the sale of the asset resulted in a loss in dollar terms? Or not — because that would be double taxation on the same transaction?
I’ve gotten two very different answers on this from different (presumably credible) people, so I want to hear what people here have to say.
by No_Carob2670
