CRA indicates that deemed interest on an FX-denominated stripped coupon should be translated on a daily basis

What exchange rate should be used under s. 261 where a taxpayer holds a stripped coupon denominated in a foreign currency on which interest is deemed under Reg. 7000(2)(b) to accrue throughout the year (if the taxpayer, e.g., a corporation, is described in s. 12(3)) or throughout the year up to the anniversary date in that year (if the taxpayer, generally, an individual, is described in s. 12(4))?

CRA noted that such interest accrues on a daily basis and appeared to indicate that the interest accruing on each such day is to be translated at the relevant spot rate for that day. One suspects that most accountants will continue to use average exchange rates.

Neal Armstrong. Summary of 3 November 2023 APFF Financial Strategies Roundtable, Q.10 under s. 261(2)(b).