- Each part of the calculation is converted at its own rate: proceeds at the rate when you sold, cost at the rate when you acquired, and outlays at the rate when incurred.
- You report in Canadian dollars, and the taxable part of a gain is one-half of it.
- Report the disposition in the calendar year it happens, and file a return even if no tax is owing.
If you hold US stocks or other property priced in a foreign currency, the exchange rate can create a gain or loss in Canadian dollars even when the price barely moved. Your tax return, however, must be in Canadian dollars.
This article explains which exchange rate to use for each part of the calculation, how the gain is then taxed, and how to keep records so the conversion is easy to support.
This article covers Canadian federal tax law, which applies in every province.
Three amounts, three exchange rates
When you sell foreign-currency property, you convert the proceeds at the exchange rate in effect at the time of the sale, the adjusted cost base (ACB) at the rate when the property was acquired, and the outlays at the rate when they were incurred. You then report the result in Canadian dollars.
| Amount | Rate to use |
|---|---|
| Proceeds of disposition | Rate in effect at the time of the sale |
| ACB | Rate when the property was acquired |
| Outlays and expenses of selling | Rate when they were incurred |
Because the purchase and sale happened on different dates, the two rates will usually differ. That difference is built into your Canadian-dollar gain or loss.
Calculating the gain
The basic calculation is the proceeds of disposition, less the ACB, less the outlays and expenses of selling. Do this after each figure has been converted to Canadian dollars.
ACB is usually the cost of the property plus the expenses to acquire it, such as commissions and legal fees. If you hold identical properties, such as shares of the same class, the ACB is an average that is recalculated at each purchase. If you bought shares over several years, each purchase was made at its own exchange rate, so good records of each purchase date matter.
How the gain is taxed
The taxable capital gain is one-half of the capital gain. The CRA has confirmed that the one-half rate applies to gains realized in 2024, 2025 and 2026, because the proposed increase never took effect.
If your taxable capital gains exceed your allowable capital losses, the difference is included on line 12700 of your T1 return. It is added to your other income and taxed at your marginal rates, not as a separate flat tax.
Reporting on your return
Report a disposition in the calendar year the sale or deemed sale occurs, and file a return even if no tax is owing. On Schedule 3, Part 3, you report proceeds of disposition in column 2, ACB in column 3, outlays and expenses in column 4, and the gain or loss in column 5. A positive result goes to line 12700, and a negative result does not.
Gains or losses shown on T3, T4PS, T5 or T5013 slips are generally reported on line 17400 or 17600 of Schedule 3.
Not every sale is a capital gain. Whether frequent trading makes the profit business income instead depends on the circumstances.
What to do next
- Gather purchase and sale confirmations showing the dates, the foreign-currency amounts and any commissions.
- Record the exchange rate for the sale date, each purchase date and each date an expense was incurred, and note where each rate came from.
- Convert each figure to Canadian dollars before you subtract.
- Keep a running average ACB for identical shares you bought at different times.
- Complete Schedule 3 and file your return even if you owe nothing.
- If you trade often or hold complex foreign property, ask a lawyer or accountant how it should be reported.
Frequently asked questions
Do I convert only the final gain into Canadian dollars?
No. Proceeds are converted at the rate in effect at the time of the sale, the ACB at the rate when you acquired the property, and outlays at the rate when they were incurred. The gain is then calculated in Canadian dollars.
Is the full gain taxed?
The taxable capital gain is one-half of the capital gain. It is added to your other income and taxed at your marginal rates.
What if I have a loss in Canadian dollars?
A negative result on Schedule 3, Part 3 does not go to line 12700. Net capital losses can be applied only against taxable capital gains.
Do I report if I owe no tax?
Yes. File a return even if no tax is owing, and report the disposition in the calendar year the sale occurs.
Sources
- Income Tax Act, s. 38 — Justice Laws (federal)
- 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
- CRA – Capital losses — 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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