Revenue Canada Round Table TEI, 16 May 1994, Q. 11 (C.T.O. "Foreign Exchange Gains and Losses")

RC is generally not prepared to accept that foreign currency losses arising as the consequence of the sale of a currency pursuant to the exercise of a forward contract would be an expense incurred in the year in the course of borrowing money.

The use to which funds borrowed in a foreign currency have been put will be a factor in determining the nature of any gain or loss incurred or realized with respect to a forward contract used to hedge any exchange exposure relative to that borrowing.

There are no specific criteria for determining whether foreign currency borrowings form part of the fixed or permanent capital of the borrower.