Page 10 - Chapter 22 - Foreign Exchange

REMEMBER:

• There are exchange items and underlying items in each transaction.

• Identify each item separately and treat it separately for tax purposes.

EXAMPLE

Co A purchases trading stock from an American supplier @ $100 000.

To protect the company against foreign currency exchange fluctuations,

Co A took out a hedging item (FEC or FCOC).

Items?

Exchange items Underlying item

Debt FEC/FCOC Trading stock

s 11(a)

s 24I s 24I Conversion to Rand? s 25D s 22