CRA indicates circumscribed acceptance of using average exchange rates

When and for what length of period is it acceptable to use an average exchange rate? CRA responded:

[F]or 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.

Neal Armstrong. Summary of 7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.3 under s. 261(1) – relevant spot rate – (a), s. 39(1.1) and s. 40(1)(a)(i).