CRA confirms that structuring to satisfy the s. 20(1(c) direct-use test is not contrary to the revised GAAR

Folio S3-F6-C1 stated that a “taxpayer may restructure borrowings and the ownership of assets to meet the direct use test” under s. 20(1)(c). The Folio provided the example of an individual selling shares on the TSX in order to use the proceeds to pay off borrowings that had been used to acquire a personal-use property (her condominium); and borrowing money to acquire replacement shares, such that the borrowed money was directly used for an income-producing purpose.

CRA confirmed that this “series of transactions … would not engage the application of the GAAR” notwithstanding the introduction of s. 245(4.1) (but cautioned that its answer might differ if the series included other transactions).

Neal Armstrong. Summary of 9 October 2025 APFF Financial Planning Roundtable, Q.3 under s. 245(4).