Using an intermediate note transaction does not block a share-substitution finding

The stop-loss rule in s. 93(2.01) reduces a capital loss from the disposition of a foreign affiliate share for exempt dividends received on that share or "a share for which [it] was substituted;" and s. 248(5)(a) indicates that where there are multiple property substitutions "the property acquired by any such transaction shall be deemed to have been substituted for the [original] property."

Where shares of FA1 are disposed of for a note of FA2, and that note is disposed of for shares of FA3, CRA considers the shares of FA3 to be substituted for those of FA1, i.e., the concept of share substitution is not restricted "to a chain of substitutions in which only shares are substituted."

Neal Armstrong.  Summary of 10 May 2013 Memorandum 2012-0464901I7  under s. 248(5).