Cases
MacDonald v. Canada, 2020 SCC 6
The taxpayer had held a significant investment in the common shares of a listed bank (“BNS”) since 1988. In 1997, due to “storm clouds,”...
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| Tax Topics - General Concepts - Purpose/Intention | intention re forward contract determined on basis of objective linkage to hedged asset rather than testimony as to subjective purpose | 335 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss - Hedges | cash-settled forward “objectively” was a capital share hedge notwithstanding no matching share sale | 542 |
The Queen v. Macdonald, 2018 FCA 128, aff'd 2020 SCC 6
The taxpayer had held a significant investment in the common shares of Bank of Nova Scotia (“BNS”) since 1988. In 1997, due to “storm...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss - Hedges | cash-settled forward was hedge of share bloc irrespective of speculative intention | 297 |
Tamas v. The Queen, 81 DTC 5150, [1981] CTC 220 (FCTD)
Losses sustained by the taxpayer radiologist from the purchase and sale of silver futures were fully deductible. Dubé J stated (at p....
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | silver futures trading on income account | 118 |
Atlantic Sugar Refineries v. Minister of National Revenue, 49 DTC 602, [1949] S.C.R. 706
The taxpayer was in the business of purchasing, refining and selling sugar. It did not normally engage in hedging transactions. However, on the...
See Also
MacDonald v. The Queen, 2017 TCC 157, rev'd 2018 FCA 128, which was aff'd in turn by 2020 SCC 6
The taxpayer had held a significant investment in the common shares of Bank of Nova Scotia (“BNS”) since 1988. In 1997, due to “storm...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | cash-settled forward sale of shares not sufficiently linked to underlying shareholding to be a hedge | 199 |
Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 DTC 6532, 2006 SCC 20, [2006] 1 S.C.R. 715
The taxpayer sold its gold production to bullion dealers at the spot price but also, in order to manage the risk associated with fluctuations in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | shifting CRA position could not be relied upon except to evidence ambiguity | 79 |
| Tax Topics - Statutory Interpretation - Redundancy/reading in words | presumption against tautology | 120 |
| Tax Topics - Statutory Interpretation - Resolving Ambiguity | residual presumption in favour of the taxpayer | 133 |
| Tax Topics - Income Tax Regulations - Regulation 1204 - Subsection 1204(1) - Paragraph 1204(1)(b) | cash-settled derivatives had the effect of fixing mine production] | 453 |
| Tax Topics - Statutory Interpretation - Regulations/Statutory Delegation | addition of regulation did not significantly expand scope of tax | 264 |
Friesen v. The Queen, 95 DTC 492, [1995] 1 CTC 2560 (TCC)
The taxpayer, who did not have any business enterprises relating to the commodities in question, traded 66 times in commodities contracts (both...
Administrative Policy
29 July 2004 Internal T.I. 2003-0023761I7 F - Contrat de SWAP d'équité
In connection with its monetization of the shares of a corporation, the taxpayer transferred the shares of that corporation to a Newco...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | loss on equity swap entered into in monetization transaction was on capital account | 163 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | termination of equity swap contract entailed the disposition of property | 67 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) | swap termination payment could be deducted if it was incurred to make the disposition (the swap payment termination) | 194 |
13 February 2020 External T.I. 2019-0826051E5 - Income from a securities trading business
Would the trading of securities, such as speculative futures and options contracts on commodities, by a corporation be on income or capital...
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| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified Investment Business | a CCPC can generate active business income from its trading in securities | 211 |
6 October 2017 APFF Financial Strategies and Instruments Roundtable Q. 16, 2017-0705181C6 F - Hedging & George Weston Limited
After noting that “the CRA has already stated that it accepts the decision … in George Weston,” CRA noted, however, that:
The approach taken...
21 October 2015 Internal T.I. 2015-0592781I7 - treatment of bond locks
Canco, which was wholly-owned by its Canadian Parent, entered into “Dividend Bond Locks” and “Interest Bond Locks” (collectively, the...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Timing | losses on interest or dividend rate hedges could be amortized/any gains immediately includible | 235 |
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 - Foreign Exchange | s. 85(1) roll of FX forward to sub | 195 |
8 October 2010 CTF Roundtable, 2013-0507191C6 - Monetization of Securities - 2010 CTF Conference
Respecting arrangments for the monetization of shares of public corportions, CRA stated:
Ruling F in document 2007-0246461R3 provides that the...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(b) | payment under an equity swap not a capital loss because no disposition (and on income account) | 187 |
14 January 2010 Internal T.I. 2009-0323991I7 F - Débenture échangeable et opération à terme
A predecessor of the taxpayer monetized its shares of Corporation 2 by entering into a forward sale with a third party (the “Purchaser”) and...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | only ½ deduction under s. 20(1)(f)(ii) for premium paid on cash-settling an exchangeable debenture under pre-2010 policy, and no s. 20(1)(f) deduction for cash settlement of forward | 337 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) | CRA position of applying changes in published policy prospectively | 105 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) | full deduction of amounts only partly, or not, deductible under s. 20(1)(f) would have caught the eye of a wise and prudent person reviewing the return | 134 |
2007 Ruling 2007-0246461R3 F - Monétisation d'actions d'une société publique
Proposed transactions
Holdco A and Holdco X (which are holding companies of the CEO and executive vice-president, respectively, of ACO, which is a...
12 January 2005 External T.I. 2004-0101161E5 - Trading in stock index futures
Would trading by an individual, who makes trades every day and where they constitute the major source of income, in stock index futures which are...
4 August 1994 External T.I. 9414045 - FINANCIAL FUTURES - CAPITAL OR INCOME ACCOUNT
Would trading in futures by a mutual fund give rise to capital gains, rather than ordinary income? CRA responded:
Although Interpretation Bulletin...
25 May 1994 External T.I. 9404215 - GAINS OR LOSSES ON FUTURES AND SHARES
A seat owner-member of a Futures Exchange whose business activity consisted of trading in futures would be required to report his transactions on...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares | 28 |
31 March 1994 Administrative Letter 9337012 - MUTUAL FUND TRUST INVESTING IN FUTURES - INCOME ACCOUNT
A mutual fund that invests primarily in derivatives, futures and like investments will realize resulting gains and losses on income account....
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| Tax Topics - Income Tax Act - Section 132 - Subsection 132(6) | investing undertaking can be on income account | 40 |
| Tax Topics - Income Tax Act - Section 132 - Subsection 132(6) | commodity futures are investing but may be on income account | 59 |
Articles
Nigel P.J. Johnston, Roger E. Taylor, "Taxation of Hedges and Derivatives: Recent Developments", 2016 Conference Report (Canadian Tax Foundation), 13:1-36
Potential treatment of a dynamic hedge as on capital account (pp. 13:11-12)
A static hedge is one that does not have to be rebalanced as the price...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Timing | 731 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Derivative Forward Agreement - Paragraph (b) - Subparagraph (b)(iii) | 561 |
Raj Juneja, "Taxation of equity derivatives", 2015 CTF Annual Conference paper
Potential capital treatment of equity derivatives (p.17:18-19)
[E]quity derivatives in many cases are not entered into to hedge exposure to other...
Commentary
Where the business of a corporation entails the purchase or sale of a particular commodity (e.g., the sugar purchases of a sugar refiner), gains...