Publicly traded shares and canadian mutual funds held in a foreign currency
If you sell publicly-traded shares or redeem mutual funds (e.g., mutual fund trust units or shares of a mutual fund corporation) that are denominated in a foreign currency, you may trigger a foreign exchange gain or loss. You must convert the adjusted cost base (ACB) and sale proceeds of the security into Canadian dollars to calculate your capital gain or loss. For Canadian tax reporting purposes, the foreign exchange rate that was in effect on the date of the transaction (i.e., the settlement date of the purchase and the settlement date of the sale) is used to calculate the capital gain or loss in Canadian dollars. If you make several purchases of a security at various times throughout the same year, you may use the average annual exchange rate for these purchases.
Income Distributions from Investments
You may hold securities that pay income in a foreign currency. You will generally need to convert this income to Canadian dollars using the foreign exchange rate on the date the income was received for the purposes of reporting this income on your Canadian tax return. If you are receiving income distributions throughout the year, the Canada Revenue Agency (CRA) has stated that it is acceptable to use the average exchange rate for the tax year, when reporting the income on your income tax return. It is important to note that using the average exchange rate is not acceptable for reporting capital gain/loss transactions.
