- Convert the sale proceeds at the exchange rate when you sold, the cost at the rate when you bought, and each expense at the rate when you paid it.
- Only half of the capital gain is a taxable capital gain, and it is added to your other income.
- You report the sale in the calendar year it happens, in Canadian dollars, even if no tax is owing.
If you bought shares of a US company in US dollars and later sold them, your Canadian return does not care what the gain looked like in US dollars. It cares what the gain is in Canadian dollars. That means the currency movement between your purchase and your sale can change the result, sometimes a lot.
This article walks through how the conversion works, how the gain is calculated and where it goes on your return. It is general information, not advice on your own situation.
This article covers Canadian federal tax law, which applies in every province.
Convert each amount at its own exchange rate
The key point is that you do not convert the final gain at a single rate. You convert each piece at the rate that applied when that piece happened.
| Amount | Exchange rate to use |
|---|---|
| Proceeds of disposition (what you sold for) | The rate in effect at the time of the sale |
| Adjusted cost base (what you paid) | The rate in effect when you acquired the property |
| Outlays and expenses (such as commissions) | The rate in effect when you incurred them |
Everything is then reported in Canadian dollars. If the US dollar rose against the Canadian dollar while you held the shares, your Canadian dollar gain will be larger than the US dollar gain suggests. If it fell, the gain may shrink or even turn into a loss.
Working out the gain
The gain is the proceeds of disposition minus the adjusted cost base (ACB) and minus the outlays and expenses of selling. The ACB is usually the cost of the property plus the expenses to acquire it, such as commissions and legal fees.
The CRA gives a simple example in dollars: 400 shares sold for $6,500, with a $60 commission and a $4,000 ACB, produce a gain of $2,440, of which half, $1,220, is the taxable capital gain. With US shares you would run the same arithmetic after converting each figure to Canadian dollars.
If you bought the same stock several times, the identical shares use an average ACB that is recalculated at each purchase, and selling some of them does not change the average ACB per share. With foreign purchases, each purchase is converted at its own rate before it goes into the average.
How the gain is taxed
The taxable capital gain is one-half of the capital gain, and the allowable capital loss is one-half of the capital loss. The one-half rate applies to gains realized in 2024, 2025 and 2026, because the proposed increase to two-thirds was cancelled.
If your taxable capital gains are more than your allowable capital losses, the difference goes on line 12700 of your T1 return. It is added to your other income and taxed at your marginal rates, so it is not a separate flat tax.
Where it goes on your return
- Schedule 3, Part 3 uses columns for proceeds of disposition (column 2), ACB (column 3), outlays and expenses (column 4), and the gain or loss (column 5).
- A positive result carries to line 12700. A negative result (a net capital loss) does not.
- Gains or losses shown on T3, T4PS, T5 or T5013 slips are generally reported on line 17400 or 17600 of Schedule 3.
- Report the sale in the calendar year in which it happens, and file a return even if no tax is owing.
If you ended up with a loss, it can only be applied against taxable capital gains. It can be carried back three years and carried forward indefinitely.
What to do next
- Gather your trade confirmations showing the date, price and commission for every purchase and sale.
- Record the exchange rate you are using for each date, and keep a note of where it came from.
- Convert proceeds, cost and expenses separately, then calculate the gain in Canadian dollars.
- Check whether you sold at a loss and bought the same shares again within 30 days before or after the sale. A loss may be denied in that case.
- Ask whether frequent trading could make your profit business income rather than a capital gain, because that changes how much is taxable.
- Speak with a lawyer or accountant if you have many trades, several accounts or a large gain.
Frequently asked questions
Do I convert the gain or each amount to Canadian dollars?
Each amount. Proceeds are converted at the rate when you sold, the cost at the rate when you bought, and expenses at the rate when you paid them. The gain is the difference in Canadian dollars.
Is the whole gain on my US shares taxable?
Generally only half. The taxable capital gain is one-half of the capital gain. That amount is added to your other income and taxed at your marginal rates.
Do I need to report a sale if I owe no tax?
Yes. You report a disposition in the calendar year it occurs, and you should file a return even if no tax is owing.
Can I lose the benefit of a loss if I buy the stock back?
Possibly. A loss is superficial if you or an affiliated person acquires the same or identical property within 30 days before or after the sale and still owns it at the end of that period. A superficial loss cannot be deducted and is usually added to the cost base of the replacement property.
Sources
- Income Tax Act, s. 38 — Justice Laws (federal)
- Finance Canada – Report on Federal Tax Expenditures 2026, part 2 — canada.ca
- CRA – Update on administration of proposed capital gains taxation changes — canada.ca
- CRA – Calculating and reporting your capital gains and losses — canada.ca
- CRA – Line 12700 – Capital gains — canada.ca
- CRA – Completing Schedule 3 — canada.ca
- CRA – T4037 Capital Gains — canada.ca
- CRA – Special rules and other transactions — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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