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Derivative Instruments — New Clarity for Characterization

Derivative Instruments - New Clarity for Characterizati

Taxpayers should have more tax certainty when analyzing derivative instruments.


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Taxpayers should now have more certainty and guidance when analyzing the income tax treatment of derivative instruments that involves an underlying capital asset. The Supreme Court of Canada's (SCC) recent decision in MacDonald v. The Queen (2020 SCC 6), which was released on March 13, 2020, may help with determining the tax treatment of gains and losses from derivatives as on income account or on capital account. The decision built on past jurisprudence to confirm the relevant framework and specific principles to characterize such gains and losses.

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