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You are liable for taxes as soon as you sell the stock. There is no need to physically convert the GBP back to dollars. In order to determine the tax liability, you convert the purchase price to dollars at the purchase date exchange rate and the sales price to dollars at the sale date exchange rate. The difference (including commissions, of course) is your taxable gain or loss.


That makes sense.

But supposing

a) I do not convert the currency on the date of the sale, but do so after a few days during which the dollar appreciates. Not my foreign currency buys less dollars than on my original sale date. How do I report the loss?

b) I do not convert the currency on the date of the sale, but I buy new shares in foreign currency. How do I calculate my new cost basis? The reason I ask this is because, I haven't really converted my GBP to USD. Also, the USD-GBP exchange rate and the GBP-USD exchange rate usually is different. So on the date of the sale, for my first transaction, say I used the GBP-USD rate to calculate my total profit/loss. Now when I reinvest the shares, what rate do I use to calculate my tax basis?

Is there an irs document you may know off that discusses these issues?
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