Tax Consequence The tax consequence of foreign exchange exposure varies by country. As a general rule,however,only realized foreign exchange losses are deductible for purposes of calculating income taxes. Similarly,only realized gains create taxable income. "Realized"means that the loss or gain involves cash flows.Tax Consequence The tax consequence of foreign exchange exposure varies by country. As a general rule, however, only realized foreign exchange losses are deductible for purposes of calculating income taxes. Similarly, only realized gains create taxable income. “Realized” means that the loss or gain involves cash flows