# USD to CAD



## buddha (Mar 12, 2018)

In 2017, I sold 50k USD for CAD @ 1.27 approx. Will there be any tax on the CAD I received?

I also sold 30k CAD back to USD @ 0.81 approx. in the same year. Any more taxes?


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## gardner (Feb 13, 2014)

Disposal of foreign currency is a taxable capital event, as far as the CRA is concerned. You would need to know the ACB of your USD to calculate the gain or loss. Currency gains of C$200 or less are not taxed. The gain or loss is a capital gain, taxed at the same rate as other gains and cam be written down against losses or, in the case of a loss, carried forward.


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## buddha (Mar 12, 2018)

gardner said:


> Disposal of foreign currency is a taxable capital event, as far as the CRA is concerned. You would need to know the ACB of your USD to calculate the gain or loss. Currency gains of C$200 or less are not taxed. The gain or loss is a capital gain, taxed at the same rate as other gains and cam be written down against losses or, in the case of a loss, carried forward.


Thanks Gardner for the reply. I am a relatively new immigrant to Canada ; so don't know much about this. 
Can we make some calculations from the data I gave in my previous post? thanks again.


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## buddha (Mar 12, 2018)

Gardner,
The USD in question were transferred from India after conversion from Indian rupees.
So, can you guide me how to calculate the ACB and then tax?

thanks


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## Eclectic12 (Oct 20, 2010)

Some info ... https://www.theglobeandmail.com/glo...ax-hit-on-us-dollar-accounts/article28440263/

Section one of this article covers CG from shares while section two walks through an example of currency exchange.
https://www.milliondollarjourney.com/capital-gains-tax-when-converting-currency.htm


For your example, I suspect you need to look up what USD - CAD exchange rate at the Bank of Canada on the day the USD was received to get the cost.


Cheers


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## gardner (Feb 13, 2014)

If the OP owned the US$ at the time of immigration, then the ACB would be the US/CAN exchange rate on that day.
You can go look up a specific day or yearly effective averages at the bank of canada.

https://www.bankofcanada.ca/rates/exchange/legacy-noon-and-closing-rates/

Lets say you arrived on 2015-Feb-20 with US$100,000. The BoC rate on that day was 1.2506 giving you an adjusted cost basis of C$125,060

If you converted U$10K of that today using a big bank they might give you an exchange rate of spot (1.2828) - 1% or ~ 1.27 or C$12,700. Your ACB is C$12,506 giving you a currency gain of C$194.

If you used U$10K of that today to buy Canadian National Railways stock on the NY exchange, then you are disposing of the $US at the full exchange rate, not discounted by a bank. So you might calculate the disposal of U$10,000 as C$12,828 for a gain of C$322.


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## gardner (Feb 13, 2014)

buddha said:


> I also sold 30k CAD back to USD @ 0.81 approx. in the same year. Any more taxes?


On this side of the equation there is no taxable event. But you do need to keep track of the C$ effective cost of those US$. If you have US$ you acquire at different times, at different rates, you would want to use a spreadsheet or something to keep track of the effective cost basis as you go along. It can get fussy with US$ interest or dividend payments and similar small amounts coming in. I think this is why they put the $200 wiggle room in.


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## buddha (Mar 12, 2018)

gardner said:


> On this side of the equation there is no taxable event. But you do need to keep track of the C$ effective cost of those US$. If you have US$ you acquire at different times, at different rates, you would want to use a spreadsheet or something to keep track of the effective cost basis as you go along. It can get fussy with US$ interest or dividend payments and similar small amounts coming in. I think this is why they put the $200 wiggle room in.


Thanks for helping. 
For two way conversions , can't we take CAD out of the equation, and just pay tax on the USD profit?
Assuming, I sold 50k USD to CAD @ 1.27 = 63500 CAD.
And without investing that CAD I sold it all back to USD @ .81= USD 51435.
A proift of USD 1435. Just pay tax on that. No?


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## buddha (Mar 12, 2018)

I checked my past; The day I landed as an immigrant in 2011 , 
USD/CAD were almost at par ( 1.009) And I had the USD 50k already sitting in my account in USA.

I actually moved to Canada in 2015 and transferred the 50k from US to my Canadian account.


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## gardner (Feb 13, 2014)

buddha said:


> No?


No. You would need to track the equivalent C$ value at each stage. You can't take C$ out of the equation since it is the change in $US/$CAN exchange over time that creates the currency gain. Think of it as if $US were not a currency but units of an investment fund. What you're getting taxed on is the gain-loss on trading that fund. The fund's value in C$ is the only thing the CRA cares about. (*)



> I checked my past


Sounds like you moved from India to the US in 2011, then to Canada in 2015. As an immigrant to Canada the baseline value for your settler's effects is the 2015 date. The change in $US$CAN rate between 2011 and 2015 is irrelevant, since you would have been taxed in the US and no currency gain is possible since $US is the coin of the realm.

(*) there is some provision for doing your ENTIRE taxes in a foreign currency, but that is something only a large company would consider, I think.


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## buddha (Mar 12, 2018)

gardner said:


> Sounds like you moved from India to the US in 2011, then to Canada in 2015. As an immigrant to Canada the baseline value for your settler's effects is the 2015 date. The change in $US$CAN rate between 2011 and 2015 is irrelevant, since you would have been taxed in the US and no currency gain is possible since $US is the coin of the realm.


No. No US immigration. Just kept this US$ account in US for US visits as a visitor from India. I landed as a Canadian immigrant in 2011 , held the Canada resident status but lived in India 2012 to 2015. Moved back to Canada in 2015.

Stupidly ignorant of these currency taxes, I converted a larger amt of USD to CAD in 2018. Is there anything I can do to reduce the tax liability for this conversion for 2018?

thanks


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## gardner (Feb 13, 2014)

buddha said:


> Is there anything I can do to reduce the tax liability for this conversion for 2018?


You can incur capital losses to offset, or bring forward losses from other years. Generally the tax on capital gains is 1/2 as much as for income or interest, so it might not be as bad as you think. But you should work it out.

You will need to work out the adjusted cost basis of the $US you disposed of. If you brought nearly all of it with you when you immigrated, then this is the rule that would apply.

https://www.canada.ca/en/revenue-ag...on-residents/newcomers-canada-immigrants.html



> Property you owned before you arrived in Canada
> 
> If you owned certain properties, other than taxable Canadian properties, at the time you immigrated to Canada, we consider you to have sold the properties and to have immediately reacquired them at a cost equal to their fair market value (FMV) on the date you became a resident of Canada. This is a deemed disposition.


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## buddha (Mar 12, 2018)

Thanks Gardner for all the answers.


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## buddha (Mar 12, 2018)

gardner said:


> You can incur capital losses to offset, or bring forward losses from other years. Generally the tax on capital gains is 1/2 as much as for income or interest, so it might not be as bad as you think. But you should work it out.
> 
> You will need to work out the adjusted cost basis of the $US you disposed of. If you brought nearly all of it with you when you immigrated, then this is the rule that would apply.
> 
> https://www.canada.ca/en/revenue-ag...on-residents/newcomers-canada-immigrants.html


Thanks Gardner for all the answers. 

One final question;

Is Capital gains taxed separately from personal income? 
For 2017, I was not employed, I had an interest income of about C$1500,
income from stock sales about C$ 12000, and finally this currency conversion income of about C$ 13000.


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## gardner (Feb 13, 2014)

https://www.canada.ca/en/revenue-ag...ting-reporting-your-capital-gains-losses.html

It is taxed along with your other income. Schedule 3 is the form for reporting.


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## Eclectic12 (Oct 20, 2010)

buddha said:


> ... Is Capital gains taxed separately from personal income?


It seems you need to do some reading of tax web sites or borrow a book from the library that covers Canadian taxes.

Capital Gains (CG) is recorded (mostly on schedule 3) where the rolled up amount of CG - Capital Losses (CL) is at the bottom of Schedule 3 cut in half (the inclusion rate). The final number, if positive is the "taxable CG" that is added to income.

For example, say I sold two stocks where stock A ends up with a $2500 CG and stock B ends up with a $700 CL. The net is $2500 - $800 = $1800. (This is all recorded on Schedule 3 Part 3.)
At the bottom of Schedule 3, the CG of $1800 is multiplied by 50% to end up with a taxable CG of $900. 

This taxable CG as it is positive is added to other income.




buddha said:


> ... For 2017, I was not employed, I had an interest income of about C$1500,
> income from stock sales about C$ 12000, and finally this currency conversion income of about C$ 13000.


Maybe you are mixing up the terms ... but to be clear, this isn't the way it works for these items.

The interest part is fine as it is income. The stock sale is a capital gain, as is the currency conversion. If you have done the "proceeds - cost base - outlays/expenses to sell" properly for the stock sales as well as the currency conversion, this will be more like.

*Capital Gain*
stocks ... $12000
currency conversion ... $13000

*On Schedule 3* of the tax return:
line 197 - Total CG .... $25000
line 199 - Taxable CG (multiply by 50%) ... $12,500 (transfer to "Taxable CG on line 127 of the main tax return)
https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/5000-s3/5000-s3-17e.pdf

On the main return, the interest income of $1500 and the taxable CG of $12500 will be added up to have a total income of $14000.
Any credits, deductions etc. will be factored in to figure out the income tax owing. This will be compared to any income tax already paid. 

If the taxes exceed what is already paid, one will owe money. If the taxes are less than what has been paid, one will get a refund.
If it matches exactly or within a dollar or two, there is no tax bill or refund with everything settled. 


If you are comfortable with computers, you can install StudioTax or buy a tax program that will help to guide you through the process and possibly answer questions.
http://www.studiotax.com/en/?page=2


Since you mention "stock sales", I wonder if you have correctly been tracking the cost base through the process of buying/selling the stock?
Depending on what stock you bought - tracking the cost base can be easy or it may have some additional factors.
https://www.theglobeandmail.com/glo...he-abcs-of-tracking-your-acb/article17838427/

Did you own the stock when you became a Canadian tax resident or did you buy it after?
If you owned it before, the cost base will have been set by the FMV on the date you became a Canadian tax resident. This may mean that the cost base from buying was say $15 a share but as it was trading at $5 when you became a Canadian tax resident, the cost base you should be using is $10 a share to end up with a smaller CG.
https://www.canada.ca/en/revenue-ag...esidents/newcomers-canada-immigrants.html#PBC


Cheers


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## buddha (Mar 12, 2018)

thanks a lot eclectic12 for explaining it to me in detail and the links. It is not that hard to understand.
Last 2 tax returns I totally relied on my accountant.
but this time with the currency exchange I wanted to know how it worked.

Stocks; I bought the stocks after I became a resident.


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## Eclectic12 (Oct 20, 2010)

You are welcome.

For the stocks, as you bought them after becoming a resident - you will have all the info you need to figure out the cost as well as the parts needed to calculate the CG or CL. As I say, the part that can complicate the ACB calculation is if mixed types of income, particularly return of capital (RoC) and re-invested capital distributions that don't yield more units (typically Canadian ETF). The way I check before buying is to go the company web site into the investors section to see what the company says about income paid by the stock.


Cheers


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