A functional currency conversion of a Canadian taxpayer to the U.S. dollar and then back again generally will change the amount of its non-capital losses

A taxpayer elected to have the U.S. dollar as its functional currency for its 2009 calendar taxation year and revoked that election for its 2011 taxation year.  The U.S. dollar appreciated from 1.1 loonies on December 31, 2008 to 1.2 loonies on December 31, 2010.

If you applied common sense and expected that a non-capital loss of Cdn. $1,200 incurred by the taxpayer in 2008 would still be a non-capital loss of that amount (if not already utilized) when the taxpayer converted back to Canadian dollars, you would be wrong.  Due to the appreciation of the U.S. dollar, that non-capital loss would now be Cdn. $1,309.

Neal Armstrong.  Summaries of 13 February 2013 2011-0430921E5 F under ss. 262(12) and 261(15).