Chapter 7 Cases 2008 - International Taxation Foreign...

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International Taxation Foreign Currency Translation Cases Read Chapter 7 and Code Sec.s 985-989 Case 1 Morton, Inc., a U.S. corporation, transferred $200,000 to a bank in Canada, where it was converted from U.S. dollars to Canadian dollars. At the date of the transfer, the exchange rate was .65:1 (US dollars to Canadian dollars). Shortly thereafter, when the exchange rate was .70:1, Morton used the money to purchase goods to be held as inventory. a. Will Morton have an exchange gain or loss on acquisition of the inventory? What about upon sale of the inventory? b. Assume that purchase of the inventory was pursuant to a contract made by Morton several months earlier to acquire the inventory for $305,000 (Canadian), and that Morton had transferred the money at that time to the Canadian bank to protect itself against the risks of currency fluctuation. How, if at all, will your answers to question a change? c.
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Chapter 7 Cases 2008 - International Taxation Foreign...

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