CRA indicates that a refreeze transaction (as described in an exception to NT 2023-02) generally would not engage GAAR

The designations by the Minister of notifiable transactions under s. 237.4 in NT 2023-02 include transactions and series of transactions that seek to avoid or defer the 21-year deemed realization rule in s. 104(4) or that seek to avoid the rules in ss. 107(5) and (2.1) on the distribution of trust property to a non-resident beneficiary, even though the property continues to be held directly or indirectly by a trust or by a non-resident beneficiary.

However, para. 81 of the CRA guidance provides an exception, stating:

“Generally, transactions which limit, in whole or in part, the future growth in the value of shares of Opco (common shares) by having the owner - Old Trust- exchange the common shares for new shares that have a fixed value (preferred shares) that is equal to the fair market value (FMV) of the common shares and where a New Trust subscribes to the growth in the value of shares of Opco (“a freeze”) or where the Old Trust sells the common shares at FMV to the New Trust would not be considered substantially similar to NT 2023-02 insofar as no rights and restrictions are expected to avoid or defer the 21 -year deemed realization rule or to avoid the rules in subsections 107(5) and (2.1) through a significant reduction in FMV.”

CRA indicated that it would generally not seek to apply the GAAR to these para. 81 transactions because they would not, in and by themselves, be considered to result in a misuse or abuse of s. 104(4), 104(5), 107(2.1) or 107(5).

Neal Armstrong. Summary of 2 June 2026 STEP Roundtable, Q.9 under s. 245(4).