Information <Information[at]INFORMATION.COM> wrote:

- quote -

I'm not a tax professional, but here is my take on your
question,.

I assume that you live and will pay income taxes in the US.

ISTM that if you are going to deduct those C$ expenses from
your US taxes in US$, you would be deducting the _actual_
US$ that you spent. This would (probably) be the conversion
rate in effect at the time you "realized" those expenses by
bringing them home.

Frex, if you charged the expenses against your Visa card,
your statement will show how much Visa charged you in US$
for those expenses, and you would show that on your schedule
C.

If you keep a bank account in Canada that needs some minimum
balance (e.g. to avoid service charges or as a cushion
against future expenditures), then at the point you convert
US$ to C$ to replenish the account, _that_ would establish
the exchange rate. Or if you haven't needed to replenish
that account, you might use the exchange rate in effect when
you most recently put a large sum of US$ into that account.

If you maintain a completely separate account in Canada and
never need to add US$ to it, but pay your Canadian expenses
out of your Canadian gross take, I'm not sure what the
answer would be. In theory I guess it should be the
exchange rate in effect when you spent the money (each time
you spend money!), but there may be some "safe harbor" that
lets you use a monthly or yearly average figure.

--
I pledge allegiance to the Constitution of the United States
of America, and to the republic which it established, one
nation from many peoples, promising liberty and justice for
all.

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Information wrote:

- quote -

I would generally calculate the US$ value of expenses based
on the rate at the time the money was converted into CDN$.

On the other hand, the US$ value of income received in CDN$
is calculated as of the time of (constructive) receipt (or
when accrued, if an accrual basis taxpayer), and capital
gain/loss is taken when the money is converted from CDN$ to
US$.

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Basically here is the problem,

I do some work in Canada. I keep track of my business
expenses and at the end of the year I calculate them and
let's say I have $10000 in business expenses in Canadian
money.

Now the value of the Canadian dollar has grown considerably
over the course of the year. At the beginning of the year
$10000 Canadian was about $5000 US. Now $10000 Canadian is
more like $7500 US.

My question is, when am I required to calculate the
comparable value of my business expenses? Am I expected to
do it immediately everytime I spend money, once a month
based on the average of the month or the hi or low of the
month, or can I use the best rate that I can find from the
entire year?

Thanks,

Tom

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