Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether a corporation can have a foreign currency gain or loss for purposes of the Act on the redemption of its own preferred shares.
Position: Yes
Reasons: CCRA accepts the decision of the FCA
MacMillan Bloedel Limited, 99 DTC 5454, F.C.A.
- MacMillan redeemed U.S. dollar denominated preferred shares for their issue price in U.S. funds
- As a result of currency fluctuation, it paid CDN$25 million more on redemption than it took in on issuance
- The F.C.A. rejected the Minister's argument that MacMillan had not sustained a CDN$25 million foreign currency loss for the purposes of subsection 39(2)
CCRA Reaction to MacMillan Decision
- The CCRA accepts the reasoning of the F.C.A.
- Reasoning will be applied to any redemption of similar foreign currency denominated preferred shares regardless of whether the result under subsection 39(2) is a gain or a loss
- It is not clear whether the reasoning can be applied to a purchase of shares where purchase price is greater than the issue price in the foreign currency but is not determined by the terms of the shares.
Olli Laurikainen
January 4, 2001
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