{"id":133,"date":"2012-10-01T16:22:47","date_gmt":"2012-10-01T16:22:47","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=133"},"modified":"2025-02-12T13:29:35","modified_gmt":"2025-02-12T21:29:35","slug":"cra-denies-fx-loss-on-fa-shares","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2012\/10\/cra-denies-fx-loss-on-fa-shares\/","title":{"rendered":"CRA denies FX loss on FA shares"},"content":{"rendered":"<p>On Wednesday, the Canada Revenue Agency (CRA) released correspondence (2012-0436921I7) between Headquarters and a Large File Case Manager in a local office (TSO).\u00a0 Under audit was a Canadian parent company (Canco), which had invested in USD preferred shares of a second-tier foreign affiliate (FA).\u00a0 When these USD preferred shares were redeemed in 2007, Canco claimed a foreign exchange (FX) capital loss under s. 39(2).\u00a0 Headquarters advised the Large File Case Manager that this capital loss was deemed to be nil under s. 40(3.6)(a) because the FA was \u201caffiliated with\u201d Canco.\u00a0 Further, this denied loss could <span style=\"text-decoration: underline\">not<\/span> be added to the cost (ACB) of any other share; Canco did not <em>directly<\/em> own any other shares of the FA (s. 40(3.6)(b)).\u00a0 It is interesting to note that s. 40(3.6)(a) requires the denied loss to be from the disposition of a <em>share<\/em>, whereas an FX loss under s. 39(2) is deemed to be from the disposition of <em>foreign currency<\/em>.\u00a0 This subtle distinction may have been the technical basis for Canco\u2019s position in 2007 that the FX loss was <span style=\"text-decoration: underline\">not<\/span> deemed to be nil under s. 40(3.6)(a).\u00a0 However, for taxation years that begin after August 19, 2011, all FX gains and losses arising from <em>asset<\/em> dispositions will be governed by s. 39(1) and not s. 39(2).\u00a0 As a result, any such technical argument would no longer be available.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>On Wednesday, the Canada Revenue Agency (CRA) released correspondence (2012-0436921I7) between Headquarters and a Large File Case Manager in a local office (TSO).\u00a0 Under audit was a Canadian parent company (Canco), which had invested in USD preferred shares of a&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-133","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=133"}],"version-history":[{"count":1,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/133\/revisions"}],"predecessor-version":[{"id":2860,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/133\/revisions\/2860"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}