The DFA rules might apply to currency forward hedges

Observations of Miller and Milet on the derivative forward agreement (DFA) and synthetic disposition arrangement (SDA) rules include:

• It is unclear whether the safe harbour from the DFA rules (contained in the Explanatory Notes) for an exchangeable share rests on the price of the share corresponding to its inherent value, or on the embedded exchange right not constituting an agreement. (The first rationale is more readily portable to other types of exchangeable securities.)
• Gains on currency forwards to hedge a capital asset or obligation might be deemed by the DFA rules to be on income account, given that their performance depends partly on an implicit interest rate differential.
• The SDA rule is very similar to an early version of the U.S. constructive sale rule, which was not implemented following criticism.
• The safe harbour under the SDA rules for arrangements that do not last at least a year means that at the time of filing its return a taxpayer may not know whether an arrangement is an SDA.
• Both the DFA and SDA arrangements can apply to the same arrangement, e.g., a forward sale of shares eliminating risk (to engage the SDA rules) and containing an embedded interest rate (to which the DFA rules apply).

Neal Armstrong. Summaries of Edward Miller and Matias Milet, "Derivative Forward Agreements and Synthetic Disposition Arrangements," 2013 Conference Report, (Canadian Tax Foundation), pp. 10:1-50 under s. 248(1) - derivative forward agreement, s. 248(1) - synthetic disposition arrangement, s. 80.6(2)(e), s. 112(9) and s. 126(4.5).