Where to Park USD

[Gulliver]

Where would be the most lucrative/tax advantaged place to park a few hundred thousand USD inheritance? I am a permanent Japanese tax resident. Living permanently in Japan.

Would it be best to keep it in the US and bring money into Japan as needed?

If so, in a taxable mutual fund account? Seems like a tax reporting nightmare.

Is an IRA advisable for a portion?

A US acquaintance warned me about triple taxation on US income. He was actually moving out of Japan because of it. (he tried to explain it, but it went over my head ).

Or, would bringing it into Japan to invest be more beneficial? Especially now with the good exchange rate.

(I’m not interested in the hassle of real estate investing).

[TokyoWart]

If you are a US citizen your investment choices are much broader and more attractive in the US. From a Japanese perspective, the tax treatment of foreign (e.g. US) foreign investment accounts is slightly disadvantageous compared to Japanese brokerage accounts but the difference is not large. In addition to the usual, "Boglehead" approved investments like broad market index funds there are a number of preferred equity or other "hard money" real estate lending funds that become available if you are an accredited investor willing to invest a few hundred thousand dollars at a time.

Your ability to fund an IRA will depend on having "earned" income after taking FEIE and is also limited to relatively smaller yearly limits of $7000 ($8000 if over 50). An inheritance itself woud not count as "earned" income.

[Gulliver]

If you are a US citizen your investment choices are much broader and more attractive in the US. From a Japanese perspective, the tax treatment of foreign (e.g. US) foreign investment accounts is slightly disadvantageous compared to Japanese brokerage accounts but the difference is not large. In addition to the usual, "Boglehead" approved investments like broad market index funds there are a number of preferred equity or other "hard money" real estate lending funds that become available if you are an accredited investor willing to invest a few hundred thousand dollars at a time.

Your ability to fund an IRA will depend on having "earned" income after taking FEIE and is also limited to relatively smaller yearly limits of $7000 ($8000 if over 50). An inheritance itself woud not count as "earned" income.

Am I over estimating the significance of the exchange rate? For example: $300,000= approx. ¥45,033,600. That’s a 50% profit, if I am calculating that correctly?

[Tkydon]

Am I over estimating the significance of the exchange rate? For example: $300,000= approx. ¥45,033,600. That’s a 50% profit, if I am calculating that correctly?

Today it is worth that. That is actually about a 30% profit over what it would have been worth Pre-COVID...

Who knows in the future?

Without any growth,

It might still be worth that $300,000 * Y150 = ¥45,000,000

or without any growth, and with a change in the Exchange Rate due to changes in Global Interest Rates:

It might be worth $300,000 * Y160 = approx. ¥48,000,000
or
It might be worth $300,000 * Y140 = approx. ¥42,000,000
or
It might be worth $300,000 * Y130 = approx. ¥39,000,000
or
It might be worth $300,000 * Y120 = approx. ¥36,000,000

It depends if ultimately you want the money in Yen or Dollars...

[captainspoke]

Where would be the most lucrative/tax advantaged place to park a few hundred thousand USD inheritance? I am a permanent Japanese tax resident. Living permanently in Japan. ...

Have you properly declared the inheritance here--paid any tax due on it?

Is there a significant appreciation in the inherited assets? (individual company shares, or mutual funds/ETFs, other property) Depending on when the assets were purchased, the changes in the $/¥ rate might seem to inflate any dollar-denominated gains.

Tax reporting here for a foreign/US account (interest/dividends/gains) is not a 'nightmare', and tho initially it is new and seemingly a challenge, many people do it--and do it on their own.

Even with an IRA (which you won't be able to plop that much money into in a single move), tho they seem to be allowed to increase in value without paying ongoing taxes here, there will certainly be tax due when you start withdrawals/cashing out.

And when you say "park" that money, do you mean for the next few months, the next few years, or the next decade or two?

[TokyoWart]

Am I over estimating the significance of the exchange rate? For example: $300,000= approx. ¥45,033,600. That’s a 50% profit, if I am calculating that correctly?

There is no "profit" on a one-way foreign exchange transaction. If you had bought the dollars at 100 yen to the dollar and were now selling them at 150 yen to the dollar, that would be a (taxable) 50% gain. Like you, I wonder about whether this is a historical moment where we should be buying up cheap yen with our US dollars, but there is no reason to believe that we can predict what exchange rates will do in the future. Certainly, if you have a good use for the funds in Japan, it makes sense to move the money here and you will be getting a bigger bang for each buck than when the dollar was at 80 yen.

[Gulliver]

Am I over estimating the significance of the exchange rate? For example: $300,000= approx. ¥45,033,600. That’s a 50% profit, if I am calculating that correctly?

There is no "profit" on a one-way foreign exchange transaction.

When you say there’s no profit, do you mean no taxable profit? If it’s not a profit, then what would be their correct terminology to describe the value gain?

[Gulliver]

Where would be the most lucrative/tax advantaged place to park a few hundred thousand USD inheritance? I am a permanent Japanese tax resident. Living permanently in Japan. ...

Have you properly declared the inheritance here--paid any tax due on it?

Is there a significant appreciation in the inherited assets? (individual company shares, or mutual funds/ETFs, other property) Depending on when the assets were purchased, the changes in the $/¥ rate might seem to inflate any dollar-denominated gains.

And when you say "park" that money, do you mean for the next few months, the next few years, or the next decade or two?

If I received part of the inheritance as mutual funds that were bought 50 years ago, are you saying that I would have to pay taxes on the 50 years of appreciation? And would I have use the exchange rate from 50 years ago?

I Would be parking in the money for the next decade or two and withdrawing as needed.

[TokyoWart]

Am I over estimating the significance of the exchange rate? For example: $300,000= approx. ¥45,033,600. That’s a 50% profit, if I am calculating that correctly?

There is no "profit" on a one-way foreign exchange transaction.

When you say there’s no profit, do you mean no taxable profit? If it’s not a profit, then what would be their correct terminology to describe the value gain?

There is no "value gain" either. At any one moment in time, exchange rates just tell you the value of yen in dollars. We're just saying that $300,000 is currently equivalent to ¥45,033,600. We can say that the dollar is stronger today against the yen that it was a few years ago.

I see that in your correspondence with captainspoke you are discussing how capital gains will be calculated on the sale based on the original exchange rates and purchase prices of those mutual funds and if you do that calculation using times when the dollar was much weaker than it is today it will make the calculated capital gain in yen larger. However, it is almost impossible to accurately calculate the basis for inherited financial assets (this is the real reason that there is a step up in basis on inheritance in the US tax system) which were acquired years before the person you are inheriting them from died. The mutual fund companies are not even required to maintain that information on original purchase dates and prices before 2008 and from their perspective the basis has been reset anyway since US mutual fund companies are only following US regulations.

[Tkydon]

Many data sources sources don't go back that far, but
https://www.macrotrends.net/2550/dollar ... ical-chart
goes back to Jan 1971.

The JPYUSD Exchange Rate was around Y300 to the USD in Jan/Feb 1974...