You are correct about the Alberta provincial tax rate. It is a flat rate unlike the federal rate which is graduated. However, I cannot find anywhere any reference to there being no capital gains tax (provincially) for Alberta. I went back to my test return in the software, changed the province of residence to Alberta and calculated the tax with and without a capital gain. The result was that it calculated provincial tax of 10% on the full amount of the taxable portion of the gain. There is nowhere that I can see on the form or in the calculation for an exemption of capital gains tax. So either you are mistaken or my tax software has a flaw in the program. I also did a quick search on the Alberta government web site and could not find a reference there.
As far as the one time capital gains exemption is concerned, it was phased out in 1994 and was 100,000 at the time. I don't ever remember a 500,000 amount (other than for the qualified items I mentioned earlier), but in that I could be mistaken. It was many years ago and the capital gains rules have changed many times since capital gains first became taxable income in 1972.
Please get back to us after you talk to your friend. I will be the first to admit that the tax act and all it's regulations and interpretation bulletins are somewhat confusing to wade through. Many times I have compared notes with another accountant in trying to sort out some of these grey areas, and many times they have approached me for my opinion on something they were struggling with. Most of my experience in calculating capital gains has been in connection with stock/commodity trading and real estate properties. I personally have not had much experience with foreign exchange transactions, but from what I can gather it is treated the same way as commodity futures such as gold, silver, wheat, etc traded on the Chicago markets through brokers, and that has been the basis of my comments to this point.