Cases
Shell Canada Ltd. v. Canada, 99 DTC 5669, [1999] 3 S.C.R. 622, [1999] 4 CTC 313
The taxpayer effectively converted a NZ$150 million borrowing into U.S. dollars by entering into a forward contract for the exchange of New...
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|---|---|---|
| Tax Topics - General Concepts - Substance | legal relationships prevail over economic realities | 201 |
| Tax Topics - General Concepts - Tax Avoidance | taxpayers entitled to rely on structure of their transactions | 170 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | borrowing in legal substance was in weak currency | 174 |
| Tax Topics - Income Tax Act - Section 67 | s. 67 does not apply where provisions, having their own internal limiting clauses, apply | 96 |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | general reasonableness provision should not be applied to interest which has its specific s. 20(1)(c) reasonableness limitation | 96 |
Ethicon Sutures Ltd. v. The Queen, 85 DTC 5290, [1985] 2 CTC 6 (FCTD)
Foreign exchange gains realized by the taxpayer as a result of the purchase of U.S. dollar term deposits were income rather than capital gains....
Neonex International Ltd. v. The Queen, 78 DTC 6339, [1978] CTC 485 (FCA)
The taxpayer company borrowed in U.S. dollars from a New York bank in order to help finance a proposed acquisition of a control interest in...
Salada Foods Ltd. v. The Queen, 74 DTC 6171, [1974] CTC 201 (FCTD)
A gain realized by the taxpayer on closing out a forward sale contract under which it agreed to purchase pounds sterling at a specified rate of...
Northern Sales (1963) Ltd. v. MNR, 73 DTC 5200, [1973] CTC 239 (FCTD)
A grain trading company, which borrowed U.S. dollars from an American affiliate in order to finance its trading operations, incurred foreign...
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| Tax Topics - Income Tax Act - Section 96 | 144 |
Alberta Gas Trunk Line Co. Ltd. v. Minister of National Revenue, [1972] S.C.R. 498, 71 DTC 5403, [1971] CTC 723
The taxpayer borrowed U.S. $67,000,000 for the construction of capital assets and in the year of borrowing sought to deduct $358,828 from its...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | 75 | |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | 75 |
Alberta Natural Gas Company v. Minister of National Revenue, 71 DTC 5400, [1971] CTC 718, [1972] S.C.R. 490
Under an amended transportation contract with its shippers, a gas transmission company became entitled, at its option in the event that its...
D.W.S. Corp. v. MNR, 68 DTC 5045, [1968] CTC 65 (Ex Ct), briefly aff'd 69 DTC 5203 (SCC)
The taxpayer, which had been following the practice of recognizing foreign exchange gains or losses on its U.S. dollar trade payables when those...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 124 |
Aluminium Union Ltd. v. MNR, 60 DTC 1138, [1960] CTC 206, briefly aff'd 63 DTC 1254
The Japanese branch of the taxpayer, whose business consisted primarily of placing the production of associated companies in the export market...
Tip Top Tailors Limited v. The Minister of National Revenue, 57 DTC 1232, [1957] CTC 309, [1957] S.C.R. 703
In 1947 the taxpayer, which anticipated the devaluation of the pound, arranged a line of credit with the London branch of a Canadian bank and...
British Columbia Electric Railway Co. v. Farrer, 55 DTC 1139, [1955] CTC 198, [1955] S.C.R. 757
The taxpayer purchased inventory goods from its U.S. parent over the period 1939 to 1945 on credit, and deducted the Canadian-dollar equivalent of...
See Also
Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182, rev'd on s. 95(1) - investment business - (a) (arm's length conduct) grounds 2020 FCA 79, in turn aff'd 2021 SCC 51
The taxpayer was found to have realized foreign accrual property income from the investing activities of its Barbados subsidiary (GBL). These...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) | requirement met where Crown knew the nature and quantum of the dispute | 269 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank | CFA qualified as a foreign bank since it was licensed under Barbados law as an international bank | 123 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) | Barbados-licensed international bank, which used Loblaw funding to invest responsively to Loblaw considerations, conducted an offside non-arm’s length business | 429 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (c) | employee equivalents was reduced by employee time described in s. 95(2)(b) | 290 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) - Paragraph 152(4.01)(a) - Subparagraph 152(4.01)(a)(ii) | GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision | 208 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series | 512 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence | 228 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness | 336 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) | purpose of s. 95(2)(l) exception was to permit non-resident subsidiaries of Canadian banks and dealers to compete internationally | 190 |
George Weston Limited v. The Queen, 2015 TCC 42
As a result of its financing of the acquisition in 2001 of a U.S. bakery business ("Bestfoods") by indirect subsidiaries through a large issuance...
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|---|---|---|
| Tax Topics - General Concepts - Evidence | hedge financing not an area of common knowledge | 95 |
Saskferco Products Inc. v. The Queen, 2007 DTC 1183, 2007 TCC 462, aff'd 2008 FCA 297
In rejecting a submission of the taxpayer that foreign exchange losses on U.S. borrowings of the taxpayer were on income account because those...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | 126 |
CCLI (1994) Inc. v. The Queen, 2006 DTC 2695, 2006 TCC 240
The taxpayer was found to have incurred foreign exchange losses on U.S.-dollar borrowing that were used by it to purchase railcars and aircraft...
Imperial Oil Ltd. v. Canada; Inco Ltd. v. Canada, 2006 DTC 6639, 2006 SCC 46, [2006] 2 S.C.R. 447
Before finding that the taxpayers were not entitled to recognize deductions under s. 20(1)(f)(ii) at the time they repaid U.S.-dollar denominated...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | 127 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Principal Amount | 96 |
Federal Commissioner of Taxation v. Energy Resources of Australia Ltd., 94 ATC 4923, [1994] FCA 924 (Full Fed. Ct.)
In order to refinance U.S.-dollar loans that it had received to finance the development of its mine, the Australian taxpayer negotiated a new...
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| Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) | 250 | |
| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | 142 |
Netupsky v. The Queen, 92 DTC 2282, [1992] 2 CTC 2531 (TCC)
The taxpayer, who in addition to being a consulting engineer, also engaged in speculation in commodities and investment in revenue-producing...
Beauchamp v. F.W. Woolworth plc, [1989] BTC 233, [1989] UKHL TC (HL)
In each of 1971 and 1972 the taxpayer borrowed 50m Swiss francs repayable in 5 years time (or earlier at the option of the taxpayer subject to a...
Overseas Containers (Finance) Ltd. v. Stoker, [1989] BTC 153 (C.A.)
The taxpayer ("OCFL") was incorporated as a subsidiary of a shipping company ("OCL") and interposed between OCL and German lenders in order to...
I.S.E. Canadian Finance Ltd. v. Minister of National Revenue, [1986] 1 CTC 2473, 86 DTC 1344 (TCC)
The taxpayer was a US-controlled Canadian finance company which borrowed funds in US dollars on the Eurodollar market from arm’s length lenders...
Pattison v. Marine Midland Ltd., [1983] BTC 448, [1984] 2 WLR 11 (HL)
A company which borrows foreign-currency funds and lends the same foreign currency funds to its customers will not realize a profit or loss [or,...
AVCO Financial Services Ltd. v. Federal Commissioner of Taxation, 82 ATC 4246, [1980] FCA 187 (HC)
Moneys borrowed in a foreign currency by a consumer finance company in the ordinary course of its business, i.e., for the purpose of lending the...
International Nickel Australia Ltd. v. Commissioner of Taxation of the Commonwealth of Australia (1977), 137 C.L.R. 347
The Australian taxpayer imported nickel products from England for purchase prices payable in sterling and generally paid for the goods after they...
Commercial and General Acceptance Ltd. v. Commissioner of Taxation (1977), 51 A.L.J.R. 842 (HC)
An Australian finance company realized a foreign exchange gain on capital account on the early repayment of U.S.-dollar borrowings from the Bank...
Caltex v. Federal Commissioner of Taxation (1960), 12 A.T.D. 170 (HC)
The taxpayer, which was in the business of importing petroleum products and selling them in Australia, incurred a large U.S. dollar debt with an...
Davies v. Shell Co. of China, Ltd. (1951), 32 TC 133 (CA)
Before agreeing to distribute its petroleum products through an agent in China, the taxpayer would require the deposit with it by the agent of a...
Administrative Policy
29 January 2015 Internal T.I. 2014-0544651I7 - Section 85 transfer of Swap Contracts
CRA found that cross-currency swaps with accrued gains, which for redacted reasons were considered to be held on income rather than capital...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | swap contract treated as inventory | 55 |
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1.1) | swap contract treated as inventory | 180 |
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | swap contract recorded on securities rather than inventory line of T2057 | 251 |
28 May 2015 IFA Roundtable Q. 1, 2015-0577691C6 - IFA 2015, Q.1: George Weston decision
How does GWL impact CRA's position on foreign currency hedges for net investments in foreign operations? CRA responded:
The CRA accepts… GWL....
5 March 2014 Internal T.I. 2013-0500891I7 - Hedging
Parent hedged a U.S.-dollar borrowing by entering into foreign currency forward contracts. In order to utilize capital loss carryforwards of a...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1.1) | s. 85(1) roll of FX forward to sub | 110 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Futures/Forwards/Hedges | s. 85(1) roll of FX forward to sub | 195 |
26 June 2013 External T.I. 2013-0481691E5 - Hedging - ITA 39(2)
In order to hedge for accounting purposes a foreign currency debt of the taxpayer owing to related parties, the taxpayer entered into foreign...
21 December 2012 Internal T.I. 2012-0465561I7 - Hedging transaction
A foreign affiliate having the euro as its unit of measure borrowed in U.S. dollars. In order for the FX risk to be transferred to the taxpayer,...
12 October 2010 Internal T.I. 2010-0367611I7 - Cross Currency swap - Income or Capital
Canco, which was a wholly-owned subsidiary of a US-resident public-company parent (Parent), borrowed in a foreign currency from Sisterco (a...
30 October 2008 Internal T.I. 2008-0297081I7 - Foreign Exchange
"Generally, if funds are borrowed for general corporate purposes, gains are probably on account of income unless it can be demonstrated that the...
2004 Ruling 2004-008527
A company that leases equipment in the ordinary course of business and funds the purchase of the leased equipment out of its general pool of funds...
23 February 2004 External T.I. 2003-0048121E5 F - Paiement reçu - annulation d'un contrat
Regarding whether an amount received by a corporation on the cancellation of FX hedging contracts that it had used to provide some protection for...
28 January 2004 External T.I. 2003-0028891E5 F - Perte sur change relative à des contrats de change
A corporation had an accrued foreign exchange loss on foreign exchange contracts that it had entered into to hedge its food-sale operations in the...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e) | CRA position regarding recognition of accrued income account losses is subject to any application of ss. 18(1)(a) and (e) | 206 |
16 December 1991 Memorandum 903636 [general principles]
(a) Where a taxpayer acquires foreign exchange, borrows foreign exchange on current account or becomes indebted in a foreign currency as a result...
29 January 1999 Internal T.I. 9900477 - FOREIGN CURRENCY, 85(1) ROLLOVER
U.S. currency that was transferred to the taxpayer by its parent under s. 85(1) would give rise to an income account gain if at the time of the...
30 August 1995 External T.I. 9520955 - DEDUCTIBILITY OF AN EXCHANGE LOSS
With respect to a foreign exchange loss realized by a corporation on refinancing both current and long-term U.S.-dollar liabilities, RC stated...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 53 |
18 September 1995 Internal T.I. 9427166 - FOREIGN EXCHANGE GAINS AND LOSSES
Before a detailed discusson of the jurisprudence, the writer indicated that, in general, gains derived from currency revaluations of foreign...
Revenue Canada Round Table TEI, 16 May 1994, Q. 11 (C.T.O. "Foreign Exchange Gains and Losses")
The use to which funds borrowed in a foreign currency have been put will be a factor in determining the nature of any gain or loss incurred or...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 45 |
10 March 1992 T.I. (Tax Window, No. 17, p. 21, ¶1798 )
Where a foreign currency borrowing is hedged with a foreign currency swap, the offsetting gain or loss and the receipt of the principal swap and...
16 December 1991 Issue Sheet (Tax Window, No. 11, p. 21, ¶1540)
Summary of RC views on the foreign exchange gain case law.
19 April 1990 T.I. (September 1990 Access Letter, ¶1414)
Where Canadian residents, who are members of a partnership doing business in the U.S., enter into currency futures contracts to close on the...
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| Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c) - Subparagraph 53(2)(c)(v) | 86 |
88 C.R. - "Finance and Leasing" - "Hedging Transactions"
The Rulings Directorate has initiated a study of interest rate and foreign currency hedging transactions.
84 C.R. - Q. 60
amounts payable or receivable by Canco to or from a financial intermediary under a coupon swap, or a basic currency swap transaction, will be on...
84 C.R. - Q.63
Whether the gain or loss on the fulfillment of a forward contract will be realized on capital or income account depends on the underlying use of...
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| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | 28 |
IT-270R2 "Foreign Tax Credit" under "Addition to Taxable Income"
Overpayments of foreign taxes implicitly are treated as capital debts.
Articles
Broadhurst, "Foreign Exchange Planning", 1993 Corporate Management Tax Conference Report, c. 8.
Stephen S. Ruby, "Recent Financing Techniques", 1989 Conference Report (CTF), C. 27 [cited in Shell, supra].
FX forward and hedged debt result in separate gain or loss (p. 27:12)
Where a foreign currency liability is hedged, the department, as stated...
Commentary
Funding of trading operations or money-lending business
Foreign exchange gains or losses made or sustained by a taxpayer in the course of its...