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When foreign exchange transactions become taxable
12/13/2018 10:41:50 PM
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By Knowledge Bureau  | Tuesday, October 17, 2017



By Evelyn Jacks

According to the Bank of Canada, the record low for the Canadian dollar against the U.S. dollar, since October 1950, was recorded on the Jan. 21, 2002 – just over 15 years ago – when the loonie was worth just 62¢. But there have been some rebounds lately; and this means for some, there may be a tax consequence.

In general, foreign exchange transactions pose a reporting problem. The Income Tax Act doesn’t provide direction on whether currency fluctuations are taxable as income (100% income inclusion) or a capital gain or loss (50% income inclusion).

In general, if the gain or loss is a result of the purchase or sale of goods or services used in business operations, the full gains or losses are reported. But if the gains or losses resulted from the purposes or sale of capital assets, the reporting results in a capital gain or loss.

That reportable gain or loss is triggered on conversion of the funds from one currency to another. Gains or losses of more than $200 in foreign exchange are reportable at the exchange rate that was in effect on the day of exchange, or an average exchange rate, provided the calculations are consistent.

If the taxpayer has a foreign bank account transacting in foreign currencies, including the payment of foreign expenses, there may be a number of transactions in which a foreign exchange gain or loss can result.

For help with these transactions, it’s best to speak to a qualified tax advisor, such as a DFA-Tax Services Specialist.

Evelyn Jacks is the founder and President of Knowledge Bureau. This article originally appeared in the Knowledge Bureau Report, © 2017 The Knowledge Bureau, Inc. Reprinted with permission. All rights reserved. Follow Evelyn Jacks on Twitter @EvelynJacks. Visit her blog at

Her latest book, Family Tax Essentials, is now available.

Notes and Disclaimer

©2017 by Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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