How does the foreign currency exchange rate work?
Foreign currency needs to be translated into U.S. dollars to determine the amount of income (such as income from the sale of goods or services, dividends or interest) to report on a taxpayer’s U.S. return and to determine gain or loss when foreign currency is disposed of. The proper translation rate depends on the item of income. You can generally get the exchange rates from banks and U.S. Embassies. Other possible sources of exchange rate would be publications, such as the Wall Street Journal. If there is more than one exchange rate, use the one that most properly reflects your income. For additional information, go to www.irs.gov.
