Tracking USD/CAD Capital Gains and ACB

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SunHe
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Tracking USD/CAD Capital Gains and ACB

Post by SunHe »

Hi,
I'm new to your informative forum so forgive me if this is posted in an improper place.

My question is about tracking ACB related to cash. Also, I am a US citizen but Canadian resident. I know there are a lot of other issues related to cross-border investing but for the moment, if you could, help me get a handle on how to track cash correctly.

I have an unregistered brokerage account with both a USD side and CAD side. If I hold, say, a US Vanguard ETF that pays a periodic dividend in USD and that dividend stays in my USD-side account (not in a MMF but just cash) do I still have to track it in both currencies for capital gains purposes? I understand I have pay taxes on the dividends and interest as they are distributed but I am wondering if I have to track the changes in ACB in both currencies.

My strategy is to hold US domiciled ETFs only in my USD side account and then as the cash dividends accrue throughout the year reinvest them. Unlike a US-based brokerage these ETFs don't have automatic reinvestment back into the ETFs shares so they are in cash for a period of time. Does it matter that the dividends are never exchanged for actually CAD or is it a matter of that in the CRA's eyes they are deemed to be priced at CAD exchange rate although held in a foreign currency.

Thanks for help you can provide.

Sun He
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DavidR
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Re: Tracking USD/CAD Capital Gains and ACB

Post by DavidR »

SunHe wrote: 06 Feb 2018 15:10 I have an unregistered brokerage account with both a USD side and CAD side. If I hold, say, a US Vanguard ETF that pays a periodic dividend in USD and that dividend stays in my USD-side account (not in a MMF but just cash) do I still have to track it in both currencies for capital gains purposes? I understand I have pay taxes on the dividends and interest as they are distributed but I am wondering if I have to track the changes in ACB in both currencies.

My strategy is to hold US domiciled ETFs only in my USD side account and then as the cash dividends accrue throughout the year reinvest them. Unlike a US-based brokerage these ETFs don't have automatic reinvestment back into the ETFs shares so they are in cash for a period of time. Does it matter that the dividends are never exchanged for actually CAD or is it a matter of that in the CRA's eyes they are deemed to be priced at CAD exchange rate although held in a foreign currency.
Welcome Sun He.
Theoretically you should track the ACB of your USD cash, and calculate a gain or loss each time you use some of it to purchase an investment (or withdraw it for personal use). But if the amounts are small and are not held in cash for long periods, then as a practical matter I would not bother with such tracking - I'd just assume the same exchange rate for the income received as for the new investment.
As you may know, on your Canadian income tax return, any income received in a foreign currency needs to be converted to Canadian dollars. Some brokers show the converted amount on their end reporting T5 slips in CAD, but others report in USD and leave the conversion up to you.
And every time you purchase a security in a foreign currency, you need to determine your CAD cost base. If you use the same exchange rate on income and purchases, then there would be gain or loss on the cash.
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Re: Tracking USD/CAD Capital Gains and ACB

Post by brucecohen »

DavidR wrote: 07 Feb 2018 10:47 As you may know, on your Canadian income tax return, any income received in a foreign currency needs to be converted to Canadian dollars. Some brokers show the converted amount on their end reporting T5 slips in CAD, but others report in USD and leave the conversion up to you.
And every time you purchase a security in a foreign currency, you need to determine your CAD cost base. If you use the same exchange rate on income and purchases, then there would be gain or loss on the cash.
When I buy or sell a US$ investment I write the exchange rate* on the confirmation and file it. Then matching the original buy confirm with the sell confirm makes tax reporting easy since they show the x-rates from each transaction.

* An easy way to get the x-rate is to check your account the morning after settlement day. AFAIK all brokers show the rate at which US$ holdings were valued the night before.
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Re: Tracking USD/CAD Capital Gains and ACB

Post by mewmew »

I hold USD and used it to purchase securities, I know how to calculate the gains/losses but where (which lines) in Schedule 3 should I report it? Can I report a total for the year or should I separate each "deemed" transaction (ie on each day I purchased a USD security using my USD cash)?

These kinds of transactions (together with Norbert's and USD and CAD cash conversion in bank accounts) don't seem to appear in T5008, how does CRA go about catching tax evaders?
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adrian2
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Re: Tracking USD/CAD Capital Gains and ACB

Post by adrian2 »

mewmew wrote: 04 Mar 2018 10:45 I hold USD and used it to purchase securities, I know how to calculate the gains/losses but where (which lines) in Schedule 3 should I report it? Can I report a total for the year or should I separate each "deemed" transaction (ie on each day I purchased a USD security using my USD cash)?
CRA only cares about the totals.
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Re: Tracking USD/CAD Capital Gains and ACB

Post by IdOp »

mewmew wrote: 04 Mar 2018 10:45 I hold USD and used it to purchase securities, I know how to calculate the gains/losses but where (which lines) in Schedule 3 should I report it?
I believe they should go in Schedule 3, Section 5, "Bonds, debentures, promissory notes and other similar properties", which ends up on Line 153.
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Re: Tracking USD/CAD Capital Gains and ACB

Post by Ken »

brucecohen wrote: 08 Feb 2018 21:50 * An easy way to get the x-rate is to check your account the morning after settlement day. AFAIK all brokers show the rate at which US$ holdings were valued the night before.
Is there not some sort of CRA requirement to use the Bank of Canada rate for the given day?
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Re: Tracking USD/CAD Capital Gains and ACB

Post by Norbert Schlenker »

CRA really doesn't care that much because it's small change in most cases, and likely is a wash over time. What they really want if they start looking hard is some internal consistency of application so that they can see you're not playing games.

I do what Bruce does - write the exchange rate on the confirm and file it. I look up the rate for settlement date at the Bank of Canada's website, and I've been doing that ever since I started investing.
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Re: Tracking USD/CAD Capital Gains and ACB

Post by AltaRed »

I have been using Bank of Canada rate on transaction date and have done so forever. Recorded in my records as soon as confirmation PDF is available.
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