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ARTICLE · 20 JULY 2016

July 2016 Pensions Newsletter

Blake, Cassels & Graydon LLP
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Herman Korfage was a Canadian resident receiving pension income from the United States. In 2000, he elected to convert his pension amount from American dollars to Canadian dollars.

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CURRENCY CONVERSION FOR TAXATION OF WORKPLACE BENEFITS

Korfage v. The Queen, 2016 TCC 69

Herman Korfage was a Canadian resident receiving pension income from the United States. In 2000, he elected to convert his pension amount from American dollars to Canadian dollars, using the applicable exchange rate: the average exchange rate over the 36 months preceding his last month of employment. This exchange rate was 1.47.

In 2010, Mr. Korfage received C$59,753 from the plan. Under the Canada-United States Convention with Respect to Taxes on Income and on Capital (Treaty), there was a tax exemption available to Mr. Korfage for US$12,024 of pension income, based on the amount of pension income that would be non-taxable under U.S. tax law. In order to claim this deduction, Mr. Korfage was required to convert US$12,024 into Canadian dollars. The exchange rate used in this calculation is the subject of this dispute.

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