Where a taxpayer other than a financial institution holds a stripped coupon denominated in a foreign currency on which interest is deemed to accrue, what date should be used to apply the exchange rate?
After noting that a stripped coupon is described in Reg. 7000(1)(b), CRA indicated that interest under s. 12(3) was deemed to accrue on a daily basis during the taxation year in which the accrued interest arises, and similarly for s. 12(4) except that interest accruing beyond the anniversary date occurring in the year is not recognized in that year. CRA indicated that, accordingly, there was interest that accrued in the foreign currency on each such day during the above periods in each taxation year, and that the exchange rate applicable to the conversion of that currency into Canadian dollars for the portion accrued during each of those days (i.e., the relevant spot rate) must be used.