Scenario 1: Immediate FOREX conversion
➤ On June 1st, I purchased stock ABC with a cost basis of $100,000 USD. The exchange rate on the day of the trade was $130,000 CAD.
➤ On June 10th, I sold stock ABC with a profit of $125,000 USD. The exchange rate on the day of the trade was $170,000 CAD.
I then immediately convert all USD back to CAD at market rate. Consequently, I will need to pay capital gains tax on approximately $40,000 CAD.
Scenario 2: Delayed FOREX conversion (loss of value)
➤ On June 1st, I purchased stock ABC with a cost basis of $100,000 USD. The exchange rate on the day of the trade was $130,000 CAD.
➤ On June 10th, I sold stock ABC with a profit of $125,000 USD. The exchange rate on the day of the trade was $170,000 CAD.
➤ However now, this time I decided not to immediately convert the USD back to CAD and kept it just sitting as cash in my brokerage account.
➤ On June 20th, I converted $125,000 USD to $150,000 CAD.
What happens now? Will I still be taxed on a $40,000 CAD profit? Or does the profit now amount to $20,000 CAD due to forex fluctuations? Could anyone provide guidance on such a scenario?
Scenario 3: Delayed FOREX conversion (gain of value)
➤ On June 1st, I purchased stock ABC with a cost basis of $100,000 USD. The exchange rate on the day of the trade was $130,000 CAD.
➤ On June 10th, I sold stock ABC with a profit of $125,000 USD. The exchange rate on the day of the trade was $170,000 CAD.
➤ However now, this time I decided not to immediately convert the USD back to CAD and kept it just sitting as cash in my brokerage account.
➤ On June 20th, I converted $125,000 USD to $200,000 CAD.
Similarly, what happens when there is a significant gain in FOREX valuation instead of a loss? Do I still only have to pay my original $40,000, or will I have to be taxed on the subsequently larger sum as well?