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Accounting for a currency gain and costs on the sale of a US property.
A client who is a UK resident individual bought a property in the US in 2010 for $150 000 and acquired the US dollars when the exchange rate was 1.65 to the £1. The property was rented out and the income has been returned both in the UK and on a US tax return.
The client has now sold the property for $250 000. After allowable costs such as the American estate agent’s fees of $15 000 the net gain is around $85 000. However in truth the gain is much more than that because the pound is now trading at about 1.30 to the dollar. My client has also therefore made a currency gain of about 25% when he converts the sale proceeds to sterling. My questions are as follows.
- How should he account for the currency gain to the UK...
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