Foreign currency amounts must be converted to U.S. dollars when preparing a U.S. tax return. The exchange rate used depends on the type of income or transaction and when it occurred.
Which Exchange Rate Should You Use?
When converting foreign currency to US Dollars, you will generally use the prevailing exchange rate, i.e., the spot rate, when the taxpayer received the income. If the income was received evenly throughout the year, you can use a yearly average currency exchange rate.
If a taxpayer receives a refund of foreign taxes that they had previously claimed for the foreign tax credit, in their amended return they will use the exchange rate on the day the taxes were paid, rather than the date of the refund.
See below for more information from the IRS about currency exchange rates.
Additional Information: