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:
1.Are there any guidelines for determining whether foreign exchange gains or losses or on income or capital account.
2.Does a statement in corporate charter providing for the making of investments necessarily mean investment transactions are on income account.
Position TAKEN:
1.Yes.
2.No.
Reasons FOR POSITION TAKEN:
1.IT-95R.
2.It is one factor to consider but not the only one.
Revenue Canada Round Table
Tax Executives Institute
May 7-10, 1995
Question 19
FOREIGN EXCHANGE GAINS OR LOSSES
INCOME VS CAPITAL
(a)Can guidelines be provided with respect to determining whether foreign exchange gains or losses are on account of income or capital?
(b)Where a corporation's charter includes as one of its functions "making investments", does this make any gains or losses realized on investments on income account or is it still possible to argue that, given the type of investment, intention, etc., certain gains or losses are on capital account?
Department's Position
(a)The Department's general views on the characterization of foreign exchange gains and losses are set out in Interpretation Bulletin IT-95R.
(b)Whether gains or losses on investment transactions are on income or capital account is a question of fact. In general, it is the Department's view that a statement of powers in the incorporating documents, while certainly a factor, is not in itself determinative. Where the realization of investments is part of the corporation's ordinary business, the resulting gains or losses would normally be on income account.
Author: B.G. Dodd
File: 951040
Date: April 20, 1995
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