Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Subsection 39(2) of the Income Tax Act (the "Act")
This is in reply to your letter of August 12, 1993, requesting whether subsection 39(2) of the Act would apply to recognize a foreign exchange on the disposition of an investment given that paragraph 40(2)(e) of the Act would apply to deny a capital loss in the particular situation described in your letter.
Our Comments:
The situation that is described appears to involve a series of actual proposed transactions. It is not our practice to give written opinions concerning proposed transactions, as indicated in Information Circular 70-6R2. Should you wish to request an advance ruling on these or other transactions which may be proposed, please refer to Information Circular 70-6R2 for the procedure to be followed. If, however, your request describes completed transactions involving a specific taxpayer, your questions should be directed to your District Taxation Office which has the responsibility of determining the tax consequences of completed transactions and their implications to the specific taxpayers. Although we are unable to provide any opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.
When a capital asset is purchased with foreign funds, the cost of that asset, for purposes of the Act, is the Canadian dollar equivalent at that time. If, at a later date, the asset is disposed of for proceeds expressed in foreign funds, any capital gain or loss on the disposition of that capital asset, is calculated by reference to the proceeds of disposition expressed in Canadian dollars using the foreign exchange rate at that time. Consequently, the provisions of 39(2) of the Act would not be applicable.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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