Tax reporting on USD<>CAD conversion

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jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Tax reporting on USD<>CAD conversion

Post by jixca »

As a US resident and non-resident of Canada

In 2020, if I converted USD$10,000 to CAD$14,000 at rate of 1.4 and keep in bank while earning slightly higher interest

If in 2021 I convert CAD$12,000 back to USD$10,000 at rate of 1.2, can I simply declare the remaining CAD$2,000 (USD$1,666) as capital gain in the 2021 tax year (form 6781 under section 988) and conclude that transaction?

Or do I have to keep track of the remaining CAD$2,000 until it's transacted?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax reporting on USD<>CAD conversion

Post by nelsona »

You have to evaluate each transaction.
In your example, you are selling $12K CAD, for which you paid $8571 USD (10/12 x $10K), and receiving $10K USD, so your gain is $1429, which you report as a gain on your 1040.

When you sell any or all of the rest of your CAD, you determine the gain at that time. If the gain is less than $200, it is not reported.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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