21.4.35. The rule set out in section 21.4.36 applies for the purpose of computing a taxpayer’s income, gain or loss for a taxation year in respect of a transaction (in this section and section 21.4.36 referred to as a “specified transaction”) if(a) the specified transaction was entered into, directly or indirectly, at any time by the taxpayer and a corporation (in this section referred to as the “related corporation”) to which the taxpayer was at that time related;
(b) the taxpayer and the related corporation had different tax reporting currencies during the period (in this section referred to as the “accrual period”) in which the income, gain or loss accrued; and
(c) it would, in the absence of this section and section 21.4.36, be reasonable to consider that a fluctuation during the accrual period in the value of the taxpayer’s tax reporting currency relative to the value of the related corporation’s tax reporting currencyi. increased the taxpayer’s loss in respect of the specified transaction,
ii. reduced the taxpayer’s income or gain in respect of the specified transaction, or
iii. caused the taxpayer to have a loss, instead of income or a gain, in respect of the specified transaction.