Mr A and Mrs B are siblings. Mr A holds all the voting shares of HA which, in turn, holds Lossco. HA also is the common shareholder of HASub. Mr. B and/or Mrs B indirectly control HBSub through a similar structure.
Lossco will make interest-bearing loans to HASub and HBSub, and HASub and HBSub will use the loan proceeds to subscribe for preferred shares of Lossco, thereby accomplishing a loss shift.
Standard rulings including GAAR. Summary states:
The transfer of losses between related, but not affiliated, corporations should not result "in an abuse having regard to [the provisions of the Act]...read as a whole", for the purposes of subsection 245(4), because specific provisions such as subsections 111(4) to (5.5), 256(7), 191.3(1), 112(2.4), paragraph 55(3.1)(c), section 80.04 etc. allow loss utilization transactions between related corporations, while only subsection 69(11) does not allow rollover where property is transferred to a person other than a person that is affiliated with the transferor.