{"id":1465,"date":"2015-03-02T15:49:38","date_gmt":"2015-03-02T15:49:38","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=1465"},"modified":"2015-03-02T15:49:38","modified_gmt":"2015-03-02T15:49:38","slug":"tax-court-finds-gain-on-hedge-to-protect-balance-sheet-equity-was-a-capital-gain","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2015\/03\/tax-court-finds-gain-on-hedge-to-protect-balance-sheet-equity-was-a-capital-gain\/","title":{"rendered":"Tax Court finds gain on hedge to protect balance sheet equity was a capital gain"},"content":{"rendered":"<p>In the CRA\u2019s long-standing view, proceeds realized on a hedge contract cannot be on capital account if there is no sale (or proposed sale) of the underlying item being hedged.\u00a0 Such could be the case if a hedge is entered into to protect the consolidated balance sheet equity of a corporate group.\u00a0\u00a0 In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2015\/03\/2015-TCC-42.pdf\"><em>George Weston Limited v. The Queen<\/em><\/a>, 2015 TCC 42, the Tax Court of Canada said that the CRA\u2019s view has no legal basis (paragraph 97).\u00a0 The correct principle is this: proceeds realized from a hedge will be on capital account if the item being hedged is a capital item.\u00a0 In <em>George Weston<\/em>, a public company entered into swaps to stabilize (hedge) the value of the group\u2019s investment in US business assets, which was exposed to a currency risk in the company\u2019s consolidated balance sheet (paragraph 77).\u00a0 As such, the swaps hedged a capital investment (paragraph 89).\u00a0 Furthermore, the swaps were terminated not to profit from the derivatives market, but rather because the risk exposure had decreased (paragraph 90).\u00a0 Accordingly, the $317 million gain on termination of the swaps was a capital gain, not ordinary business income.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the CRA\u2019s long-standing view, proceeds realized on a hedge contract cannot be on capital account if there is no sale (or proposed sale) of the underlying item being hedged.\u00a0 Such could be the case if a hedge is entered&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-1465","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1465","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=1465"}],"version-history":[{"count":0,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1465\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=1465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=1465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=1465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}