# Capital Gain/Loss on US Currency in Brokerage Account



## YYC650 (Oct 29, 2011)

I was reading on adjustedcostbase.ca that capital gains or losses can occur on funds held in a foreign account, not just on the purchase and sale of stocks. See link below:

https://www.adjustedcostbase.ca/blog/calculating-adjusted-cost-base-for-foreign-currency-cash/

So if I understand this correctly, if I had $10,000 deposited into a US account when the dollar was at par, and a year later I bought $10,000 US of a stock when the Canadian dollar had dropped so that the funds were worth $12,000 Canadian (a deemed disposition of the US funds), I would then have to declare a capital gain of $2,000 on that years tax return. If, a year later, I sold the stock when the stock price had not changed but the Canadian dollar had dropped so that the $10,000 US was now worth $13,000 Canadian, I would declare a capital gain of $1,000 on the sale of the stock. All capital gains (on the deemed disposition and on the stock sale) would be reportable in the year they occurred, as opposed to sometime later when I convert the funds back to Canadian dollars?

Do I have this correct? If so I will have to report some missed capital gains from the past few years. The idea of capital gains on the cash in my US account hadn't occurred to me until I read the article noted above.

Thanks for any insights on this.


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## humble_pie (Jun 7, 2009)

yes you have it correct. Good one!

there are basically 2 taxable events in your example, both of them happen to be capital gains but the currencies could have gone in the opposite direction, as you know.

the problem i see with broker-maintained costs in USD accounts is that the brokers show only costs in US dollars. Some brokers are calling the adjusted cost base "book value," but whatever they call it, the information is so simplistic that it's close to useless.

a client/taxpayer needs at least the date of each buy transaction that's included in his cost base so he can research the bank of canada noon exchange rate on that date. For tax purposes, the buys that go into his ACB need to be priced in CAD.

heaven help the poor souls who have to file in both countries, they need 2 ACBs. The broker figs are fine for US filing, but canadian tax authorities need realistic CAD figs.

i imagine that some clients are taking the exchange rate for the date of sale & applying that rate also to the USD cost as shown by the broker, tch. One can see that YYC is not doing that, good for him.


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## AltaRed (Jun 8, 2009)

I think most (maybe not a majority) of retail investors know to make the USD/CAD conversions based on the exchange rates in place on the dates of transaction when buying/selling assets such as stocks. I suspect amost no one knows about (or declares) forex gains/losses when converting currency in their accounts and I suspect CRA is unlikely to pursue these 'omissions'. Theoretically, over time, perhaps a decade or so, the pluses and minuses balance out as the CAD oscillates in its never ending cycle.


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## YYC650 (Oct 29, 2011)

Thanks for your insights on this. I will have to go back and see what capital gains from exchange rates I may have missed, and if they exceed the $200 annual exemption.


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## leslie (May 25, 2009)

I agree that it is doubtful that Revenue Canada ever audits this ----- because it requires you to reformat everything that happens in your account. I have done it this way. Use a 4 column paper for description, FXrate, USD, and Loonie. 
Start at the top with the cash balance at opening in both currencies. 
Subtract all purchases in USD and at the CAD equivalent you will use for your eventual capital gains. 
Add all sales likewise. 
Add dividends received in USD and their CAD equivalents that you will use for your T5 slip. 
Add up the USD and Loonie columns. 
The USD column should equal the USD cash at the end of the year. 
The difference between the Loonie column and the CAD equivalent of the USD column is the gain/loss from holding foreign cash.


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