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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: How are hedged investments to be treated for purposes of the ITA?
Position: Unable to comment.
Reasons: Issue still before the courts.
2003-000137
XXXXXXXXXX C. Tremblay, CMA
(613) 957-2139
October 14, 2003
Dear XXXXXXXXXX:
Re: Timing of the reporting of the income and expenses from Hedged Investments
This is in reply to your letter of December 15, 2002, wherein you asked how an investor should report income from a hedged investment for purposes of the Income Tax Act.
You describe a particular hedged investment where an investor holds two matched equity positions, one a short position and one a long position. The long position is normally a convertible bond, a convertible preferred share, a warrant or some other option vehicle.
We refer you to the recent 2003 tax court decision cited as Hayes et al v The Queen that involved convertible hedging. Since this decision may be appealed to a higher court, we are unable to provide any comments at this time. When this issue is finalized in the courts, we will be in a better position to discuss the matter with you.
Yours truly,
Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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