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.
QUESTION I 88
Acquisition of Control - Recognition of Unrealized Foreign Exchange Gains and Losses
Control of a corporation is acquired at a time when it has an unrealized capital loss on preferred shares of a foreign affiliate. The corporation also has an unrealized gain on debt denominated in a foreign currency which funded the purchase of the shares of the foreign affiliate. The unrealized gain and loss are due solely to a fluctuation in the value of the foreign currency relative to the Canadian dollar.
Paragraphs 111(4)(c) and (d) will require the corporation to recognize the foreign exchange loss on the shares. Will the corporation to allowed to recognize the foreign exchange gain on the debt by making a designation under paragraphs 111(4)(e) of the Act?
DEPARTMENT'S POSITION
It is the Department's opinion that a debt (i.e. liability) of a corporation is not "property" within the meaning of subsection 248(1) of the Act. Since paragraph 111(4)(e) is only applicable with respect to capital properties owned by the corporation immediately before the acquisition of control, the designation thereunder would not be available with respect to an unrealized gain on a liability denominated in a foreign currency.
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© Sa Majesté la Reine du Chef du Canada, 1990
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