CRA: Tax interpretations- average exchange rates

CRA: Tax interpretations- average exchange rates

NEWS: CRA indicates circumscribed acceptance of using average exchange rates

For purposes of determining a taxpayer's income, the CRA will generally accept the use of an average exchange rate over a given period of time (e.g., annual, quarterly or monthly) to convert amounts arising from foreign currency transactions, if all of the following conditions are met:

* the amounts (as determined in foreign currency) are relatively stable and evenly distributed over the given period

* the amounts arising in the particular period are sufficiently frequent that they do not distort income   * the relevant exchange rate does not fluctuate significantly over the period; and

* the chosen approach is used consistently from year to year.

As a general rule, the CRA will not accept the conversion of a gain or loss on the disposition of a capital property using an average exchange rate.

Consequently, the daily exchange rate for the particular dates should be used to determine, in Canadian dollars, the adjusted cost base ("ACB") of such property and any proceeds of disposition from its disposition.

Thus, CRA did not indicate any general accommodation for computing capital gains from a stock portfolio with a large volume of transactions using an average exchange rate.

“Please note that the information provided in this article is of a general nature and may not be accurate for your specific situation. The information is current as of the date of posting and is not intended to provide legal advice. It's always recommended that you consult with a professional accountant and lawyer for personalized guidance and advice."