CRA states that a deduction to Canco for repayment of an upstream loan made by its FA to a non-resident sister does not depend on FA continuing as a creditor affiliate

Where a non-resident subsidiary (FA) of Canco has made a loan to a non-resident subsidiary (SisterCo) of Canco’s non-resident parent (Foreign Parent), CRA considers that it is irrelevant that FA has ceased to be a creditor affiliate of SisterCo two years later, as a result of the sale by Canco of FA to Foreign Parent - so that s. 90(6) could still apply to include the loan’s amount in Canco’ income. However, by somewhat the same token, s. 90(14) also “is not dependent on FA being a ‘creditor affiliate’ at the time of repayment,” so that “when the loan is finally repaid a deduction will be available to Canco in the taxation year of repayment, provided the repayment is not made as part of a series of loans or other transactions and repayments.”

Neal Armstrong. Summary of 4 August 2016 Internal T.I. 2016-0645521I7 under s. 90(14).