You’ve won 10,000,000 Rials from a lottery in Oman upon purchasing a lucky ticket by chance, but it’s given to you all in cash (each stack is worth around 5000 Rials, given to you via 2 travel sized suitcases). It’s a lot more money when you factor in currency exchange.
That amount is equal to ~$26,041,666 but are you allowed to import that much into the United States tax free? All you have at the airport is 2 suitcases, each one containing 5m Rials in hard cash. However, the stress is on CBP declaration of 10,000 USD or greater.
Even if you disclosed & declared that you possess the equivalent of 26m USD in face value worth of lottery winnings from another country, would they let you keep it or seize all that money? Is it still going to be subjected to taxation despite it NOT being in Dollars?
No, you won’t have to pay taxes on that cash when importing it. But you can bet that CBP will ask nosy questions about where you got it. And unless you can satisfy them that you got it by legitimate means, they will assume you got it by illegal means and confiscate it. It’s called “civil asset forfeiture”. Look it up.
However, as a US citizen you still technically owe income taxes on all your worldwide income. But you would settle that with the IRS regardless of whether or not the money ever makes it back to the US.
Now, this situation is one of the few legitimate use cases for crypto. Find someone locally who will sell you a few hundred BTC with that cash, and now CBP has nothing to find at the airport. Then cash it out once you are in the States. The IRS would still be interested in where you got the money, because they monitor all the ways to get cash out of the Crypto ecosystem into the US. But, as long as you have documentation of your lottery win (and crypto transfers) and file it all it shouldn’t be an issue. I would prefer to take my chances as a documemted rich person by the IRS than as a rando who shows up at Newark with a briefcase of foreign currency.