Olev Edur answers your questions about your rights, personal finance, and estate planning
Question: I’ve had some money invested in a US money-market fund for a few years, which was all right when interest rates were high, but now that rates have come down quite a bit, I’ve found I can earn more with a Canadian bond or equity fund. If I were to sell some of those shares and transfer this US money back to Canada, would I have to pay any tax?
Answer: Generally, yes, if you sell units of a US money-market fund denominated in US dollars, you have to pay tax on all your earnings, including any interest you may have received during 2024 (at the relevant exchange rate) and any capital gains stemming from the exchange-rate differential between the time you bought the units and the time you sold them. And given that the American dollar has been soaring against the Canadian dollar in recent years, these gains could be significant.
You don’t mention when you bought the fund units, but if you’ve had them for “a few years,” we’ll assume that you bought them around May/June 2021, when the US dollar was worth about $1.25 CDN. (That is, the Canadian dollar was about $0.80 US.) By the beginning of 2025, the Canadian dollar had fallen below $0.70 US, meaning the US dollar was worth almost $1.45 CDN. Accordingly, if you had sold $5,000 worth of those fund units at the beginning of this year, you would have received almost $7,250 CDN, while back in mid-2021, you would have paid $6,250 CDN for those same shares, so you’d have realized a capital gain of almost $1,000.
Assuming you haven’t realized a huge amount of additional gains from other sources during 2025, your tax return would need to include almost $500 as taxable capital gains from this sale. Of course, these are hypothetical figures—you’ll have to do the calculation yourself based on actual exchange rates at the time of purchase and the time of sale.
