29 August 2007 Internal T.I. 2007-0219931I7 F - Perte sur taux de change - société de personnes -- summary under Subsection 39(2)

Canco and a US resident who each held a 50% interest in a US partnership each advanced US$1 million to the partnership and then converted those advances to partnership units at a time that the Canadian dollar had depreciated (from a 1.2 to 1.4 exchange rate) relative to the exchange rate at the time of advance. CRA found that such conversion generated a capital loss to the partnership of $400,000 under s. 39(2) of which $200,000 was allocated to Canco, and that Canco realized a capital gain of $200,000 on its disposition of the advance.