USA Are foreign currency gains/losses unavoidable?

[taxesanddeath]

Im a US LLC so my home-currency is USD.

If I have foreign-currency activity without converting to USD will I always have gains/losses? Let me explain:

Say I have a GST liability account (CAD). I make a sale in Feb and collect $1000 GST. The CAD/USD exchange is 0.80 so my balance sheet will show a GST liability of $800 USD. On Apr I remit this $1000 GST to the CRA, but the CAD/USD exchange is now 0.70 so my GST liability is now $100 USD. I'd have to DR GST liability $100 & CR curreny gain $100 and pay tax on it.

In this scenario, I recieved and remitted $1000 CAD to the CRA. I am being taxed on a gain I never realized. Is this simply unavoidable for transacting in foreign currency?

 

[kirby]

When you collect 1,000CAD if you keep the CAD as CAD you now have a CAD asset of 1,000 and a CAD liability of 1,000. If rates change then you “lose” on one and “gain” on the other for a net zero. Do you see that or are you converting the CAD cash to USD?

 

[taxesanddeath]

The CAD stayed CAD. I never converted it to USD.

However, with balance sheets you cant mix currencies, you must have a single currency. So the CAD is reported as USD using the days exchange rate on the balance sheet.

There doesnt seem to be a way around it, and a gain/loss isunavoidable for trasacting with foriegn currency.

 

[kirby]

In using a multi-currency gl, you would keep the cash asset and the liability in CAD at 1000 CAD each then at monthend recalculate both into USD at the same conversion rate so at .80 you’d get 800 for both. No gain or loss.