Suppose a company domiciled locally and whose shares I own distributes income to its shareholders in a foreign currency, i.e. USD. Should I treat this as local or foreign dividend income for accounting purposes as a shareholder?
Just to make sure I understand the situation: The company is domiciled in (I'm assuming) Canada. You own shares in it, and you're a Canadian taxpayer. The company is paying out a dividend in USD rather than in CAD.
I don't see the argument as to how it could be foreign dividend income. The form of the dividend isn't what makes it foreign or domestic (not local) dividend income. It's the domicile of the company paying the dividend and the domicile of the recipient that decide whether the dividend is domestic or foreign, I think. The form would only change the reported value of the dividend.
If the corporation paid a dividend with gold or silver bars, or with tangible property, that would still be domestic income to you, since you and the company are both Canadians, right? Paying out a dividend to a Canadian taxpayer would be domestic (read: from Canada) income regardless of form, I think.
I'm not 100% certain. I'd suggest you contact CRA for a reliably authoritative answer.