In 2014-0538591I7, the CRA confirmed that a loss due to foreign exchange (FX) fluctuations could be realized by a Canadian parent (Canco) on its shares of its wholly-owned foreign affiliate (FA) on a liquidation and dissolution of the FA. The loss was available because: (a) it arose on the dissolution of the FA itself, (b) Canco did not make an election under s. 88(3.1) to cause the dissolution to be a “qualifying liquidation and dissolution”, and (c) no exempt dividends were paid on Canco’s FA shares or shares for which the FA shares were substituted. The stop-loss rule in s. 40(3.6) did not apply because Canco was not affiliated with the FA immediately after the dissolution. Moreover, the rule in s. 69(5)(d) would preclude the application of s. 40(3.6) in any event.