How Is a Dinar Windfall Taxed? The 2026 Tax File for Currency Holders

When the Iraqi dinar revalues and a holder exchanges notes at a bank, the exchange is a taxable event. Holding is not. That much is settled. How much the gain owes is not, and IR-028 The Window: The Tax File opens that question for international holders in the US, the UK, Australia, Canada and Europe. The rule at its center: plan for the bill the law charges today, set the money aside, and treat anything the law removes as a blessing on top.

The unsettled question

US law puts foreign currency gains under section 988, which treats them as ordinary income at rates up to 37%, plus the 3.8% net investment income tax. An older reading treats currency held as a capital asset, taxed at long-term rates of up to 20% if held more than 1 year. On every $100,000 of gain the difference is $17,000. The IRS has issued no guidance on revaluation holdings and no court has ruled on a dinar gain, so the character is decided by the position a tax professional takes and the record behind it. A long, quiet hold supports the capital reading, but it does not win it alone.

The 1-year cliff

Long-term treatment needs more than 1 year, and every purchase has its own start date. Lots bought within the final year before the event sit on the short side under either reading. What the published position does not support is holding past the event to chase a treatment: every real exchange window in history tightened, and late presenters ran out of options.

Five tax systems, five answers

The UK taxes physical foreign notes as a chargeable asset at 18% or 24% with a £3,000 allowance. Australia's foreign exchange rules make the gain assessable income at marginal rates, so the 50% discount most holders expect after 12 months most likely does not apply. Canada allows 50% inclusion unless the purchase is treated as an adventure in the nature of trade. Germany exempts foreign currency held more than 1 year, and Switzerland does not tax private capital gains at all. A US citizen files a US return wherever they live.

The file that answers an audit

Every system puts the burden of proving cost on the holder, and an unproven cost defaults to zero. The file is a lot schedule, the receipts and payment trail behind each line, the dated trust schedule if one was built, the bank's exchange record, and a short note on how the notes were held. Built now, it answers the question before anyone asks it. The full report adds the estimated-tax timing, the disclosure rules that protect an argued position, the tax-free products to avoid, and the six questions for the tax seat. Read the full tax file analysis.