Denial of Canadian dollar FX losses realized by subsidiary using a different functional currency

CRA has confirmed  that where a parent with a Canadian dollar functional currency has lent in Canadian dollars to a (Canadian) subsidiary with a different functional currency, a foreign exchange loss realized by the subsidiary on repayment of the loan will be denied.

Presumably the same position would apply if the parent had lent in US dollars to its subsidiary, and it realized an FX loss (in Canadian dollars) on repayment of the loan.

Neal Armstrong.  Summary of 2011 TEI Roundtable, Q. 4 2011-0426981C6 under s. 261(20).