The taxpayers, Imperial Oil and Inco, issued debentures in U.S. dollars and later redeemed them.
Due to the appreciation of the U.S. dollar against the Canadian dollar, they suffered foreign exchange losses.
They sought to deduct these losses under s. 20(1)(f) of the Income Tax Act.
The Minister of National Revenue disallowed the deductions, treating them as capital losses under s. 39(2).
The Supreme Court of Canada held that s. 20(1)(f) is limited to original issue discounts and does not permit the deduction of foreign exchange losses, which must be claimed as capital losses under s. 39.
