CRA interprets the Shell concept of FX hedging narrowly
4 September 2013 - 9:48am
CRA considered that a taxpayer, who hedged an FX (capital account) debt owing by it to related parties by entering into foreign currency forward contracts in the amount of the principal owing, realized losses on the forwards on income account because there was no linkage between their maturity dates (they were rolled over every month) and that of the debt. This is a narrow construction of what constitutes a hedge.
Neal Armstrong. Summary of 26 June T.I. 2013-0481691E5 under s. 9 – capital gain v. profit – foreign exchange.