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Canada: Derivative instruments, new clarity for characterization of gains, losses

Canada: Derivative instruments

Taxpayers have greater tax certainty when analyzing the income tax treatment of certain derivative instruments, given a March 2020 decision from the Supreme Court of Canada.


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Concerning the income tax treatment of derivative instruments that involve an underlying capital asset, the Supreme Court of Canada confirmed the relevant framework and specific principles to characterize such gains and losses either as on income account or on capital account. The decision is based on past jurisprudence.

The case is: MacDonald v. The Queen (2020 SCC 6) (13 March 2020)

Read a March 2020 report prepared by the KPMG member firm in Canada

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