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.
This is in reply to your memorandum dated September 11, 1980 concerning suggested changes to IT-95.
Paragraph 3 of IT-95 states that foreign exchange gains and losses arising as a direct consequence of the purchase or sale of goods abroad or the rendering of services abroad (where such goods or services from part of a taxpayer's trading activities) should be viewed as income from part of a taxpayer's trading activities) should be viewed as income gains or losses notwithstanding the length of time between the date the property is acquired and the date upon which payment is effected. This position accord-s well with the reasoning and conclusion of the Exchequer Court of Canada in the case of D.W.S. Corporation v MNR [[1968] C.T.C. 65] 68 DTC 5045 which were supported by the Supreme Court of Canada in 69 DTC 5203.
Paragraph 4 on the other hand is concerned only with foreign exchange gains and losses on borrowed funds. As the XXX situations described by you involve accrued foreign exchange losses on trade payables and not borrowed funds, paragraph 3 of IT-95 would seem to apply.
Our view is that a careful reading of paragraphs 3 and 4 of IT-95 should provide there reader with the proper course of action to be followed in most instances. We understand that IT-95R, which will probably be released in the not too distant future, will contain no changes to the concepts outlined above.
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© Her Majesty the Queen in Right of Canada, 1980
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© Sa Majesté la Reine du Chef du Canada, 1980
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