No One Warned Me About Currency Gains—Now I Owe the IRS

Meet Jake. Jake’s your classic American expat dream story.

🇧🇷 Took a high-paying executive role in Switzerland.

🏖️ Bought a beachside condo in Southern France because Geneva felt "too chill"? Naturally..

🪙 Opened a local crypto investment account (because YOLO).

💰 Got paid in CHF

And now—after ten great years—Jake’s back in the U.S., ready to live his best homecoming life.

He wires all his money home...

And then 💥 the IRS sends a love letter:

“Hey Jake, congrats on your return. You owe us $7,304.40 in taxes from your currency gains. Let’s chat.”

🧠 Wait—Why Is This Taxable?

Because Jake didn’t just earn foreign income. He earned, held, and eventually converted that income back to U.S. dollars after the Euro appreciated.

In the eyes of the IRS, that’s the same thing as:

• Buying Apple stock at $100,

• Holding it while it grows to $150,

• Selling it,

• And then wondering why Uncle Sam’s hand is in your pocket.

The only difference is: Jake wasn’t trading stocks. He was just living his life and moving his money.

💱 Let’s Break Down Jake’s Euro Financial Adventure

1. Salary in CHF

Jake earned CHF 450,000 a year across 10 years.When he received it, 1 USD = 1 CHF → worth $450,00 in USD terms.

Later, when he returned and transferred it, the rate was 1 CHF=1.12 USD so his CHF 450,000 turned into $504,000. So yeah, he just got $54,000 currency gain. But in this scenario, let's make it simple and let him spend all of his money while on assignment so he got no savings by the time he got back to the US.

2. The Beachside Condo

Jake bought property in Nice €200,000 using CHF (converted at 1 CHF = 0.92 EUR).

• That was ~CHF 217,391 at the time, or $217,391 in USD basis.

He sold the condo for €250,000. When converted back to CHF (and then to USD at 1 CHF = 1.12 USD and 1 CHF = 1 EUR), the sale netted him $280,000.

📈 Capital gain on real estate in USD: $280,000 - $217,391 = $62,609

📈 Currency gain: CHF appreciated from $1.00 to $1.12 so currency gain is $36,522 (CHF 217,391 - CHF 250,000 *1.12USD/CHF)

Yep, taxable in the U.S.

Jake thought he made money on the property, but the bigger win came from Switzerland’s central bank.

3. Swiss Investment Account (aka PFIC Horror Story

Jake had a local brokerage in Zürich. His CHF-denominated ETF gains?

• Net CHF 25,000 gain

• Which became $28,000 after conversion

Taxable? Of course.

💸 The Grand Total: $36,522 in Taxable Currency Gains (and Counting)

While Jake didn’t track every transaction perfectly, the IRS did what it always does best: reconstruct his timeline with brutal efficiency.

They taxed:

• The appreciation of CHF vs. USD

• The real estate gain from Nice

• The investment income

• And probably the emotional damage too

  
  

😬 But Jake Didn’t Do Anything Wrong

He:

• Worked a legal job in Switzerland

• Bought legal property in France

• Paid taxes in both countries

• Moved his money home like any normal expat

But by not tracking the USD value at the time of earning, he opened the door for the IRS to say:

“Oh cool—you gained on that currency difference. Pay us.”

👀 This Could Happen to…

• Expats in Switzerland, Singapore, or Taiwan

• Remote workers banking abroad

• Retirees moving overseas and bringing money home years later

• Crypto holders trading across currencies

• Anyone who thinks “it’s just savings” isn’t taxable

  
  

🧠 Pro Tips to Not Be Like Jake

1. Track income in USD on the day it’s earned

   Use OANDA for accurate daily exchange rates

2. Track the cost basis of foreign property in USD

   You’ll need it to calculate gains later

3. Report investment income—even if held in foreign accounts

4. Understand that exchange rate changes = potential taxable gains

   That’s not a loophole. That’s the law.

5. File your FBARs, Forms 8938 and PFIC forms

   Because if the IRS misses your gains, they’ll find your fines.

   
   

💡 TL;DR: The Franc Gave Jake a Raise. The IRS Gave Him a Tax Bill.

Jake didn’t play the markets.He didn’t hustle crypto.He didn’t flip houses.

He just got paid in one of the world’s most stable currencies and brought it home at the wrong right time.

Now he owes some taxes and has one more souvenir from Switzerland: an audit risk.

🔗 Action Step: Don’t Let Currency Gains Wreck You

Before transferring your money home, selling foreign property, or cashing out Swiss ETFs:

✅ Use OANDA’s FX tools to calculate accurate historical USD values

✅ Label every inflow with the correct USD basis

✅ Work with a tax pro who knows Section 988, not just TurboTax

Because currency gains are real, and the IRS is fluent in francs.