USD Cash ACB in Canada: The $200 Exemption and How It Works
Foreign currency is taxable property in Canada. If you hold USD cash in your brokerage account, every conversion and many spending events can create a capital gain or loss.
Foreign currency is a taxable property in Canada
Under ITA s. 39(1.1), an individual's gains and losses from disposing of foreign currency are capital gains and losses. That subsection has covered individuals since the 2016 amendments moved them out of the older s. 39(2), which now mainly deals with foreign-currency debts. If you convert USD to CAD, spend USD on a purchase, or otherwise dispose of USD, you have a tax event. Most brokers do not calculate this for you using Canadian ACB rules.
The $200 annual exemption
ITA s. 39(1.1) provides a practical carve-out. If your net gain or loss from all foreign-currency dispositions in the year is $200 CAD or less, it is deemed to be nil. If it is above $200, only the excess is a capital gain or loss, so a $500 net FX gain becomes a $300 capital gain. ActiveACB applies this reduction automatically.
Two clarifications people miss. The threshold is net and annual, one test across every foreign-currency disposition in the year, not the American per-transaction $200 rule it often gets confused with. And CRA has confirmed that currency held in a chequing or deposit account counts as currency for this rule, so the USD balance at your broker qualifies.
The rule is meant to spare taxpayers from reporting trivial travel-money gains, but it often matters for investors with USD cash balances.
Your USD cash pool ACB
Every time you receive USD, from a sale, dividend, interest payment, or conversion, you are acquiring USD at the CAD exchange rate for that date. Every time you spend or convert USD, you are disposing of part of that pooled position. The pool works like a share pool, with total CAD cost divided by total USD units.
Transfers of USD between your own accounts are not dispositions, because the currency you hold has not changed. Spending it, converting it, or using it to buy a security is. A quick example. You convert twice, acquiring US$1,000 at 1.35 for $1,350 and US$1,000 at 1.40 for $1,400. Your pool is US$2,000 with a $2,750 cost, an average of 1.375. You then spend US$1,500 buying a stock when the rate is 1.42. The currency proceeds are $2,130 against a pooled cost of $2,062.50, an FX gain of $67.50, entirely separate from whatever the stock later does.
This is the same FX tracking logic described in the calculation methodology, but applied specifically to USD cash.
What your broker reports vs. what CRA requires
| Event | Typical broker view | What CRA requires | ActiveACB |
|---|---|---|---|
| USD received from sale | Cash balance increases | USD acquired at CAD equivalent | Tracked: adds to USD pool |
| USD spent on purchase | Cash balance decreases | Disposition of pooled USD | Tracked: removes pooled ACB |
| USD converted to CAD | FX conversion record | Capital gain or loss test | Tracked: compares proceeds to ACB |
| Annual gain or loss summary | Rarely shown for CRA purposes | Net FX gain or loss for the year | Tracked: applies $200 rule automatically |
How ActiveACB handles it
ActiveACB tracks the USD cash pool event by event from your broker export using Bank of Canada daily rates, computes gains or losses on each disposition, and applies the $200 exemption automatically. Security trades get per-leg conversion too: cost at the buy-date rate, proceeds at the sell-date rate, which is the CRA method your broker's single-rate gain/loss report does not follow. The FX result appears separately in your report so it does not get lost inside security-level gains. Upload your complete account history and your opening USD balances are derived from your own uploaded trades. Run your own broker export through the ACB calculator. Your first calculation is free. The adjusted cost base guide covers the underlying rules with worked examples.
Frequently asked questions
Does the $200 exemption apply per currency or per conversion?
It applies to your total foreign-currency gain or loss for the year, not to each conversion separately. The practical effect is that you need the yearly aggregate, not isolated transaction math.
Do I need to track every tiny USD dividend?
Yes, because each USD receipt changes the pool's total units and total CAD cost. Small entries are exactly why a manual ledger becomes error-prone.
What if I never converted USD to CAD - did I still have a disposition?
Possibly. If you spent USD to buy a U.S. security, you disposed of USD even though no explicit conversion back to CAD occurred. That still affects your FX gain or loss.
My IBKR account has both USD and CAD. How does ActiveACB know which is which?
The broker export labels the currency on each cash and trade event. For IBKR-specific export details, see the IBKR Canada tax guide.
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