There are uncertainties as to how to apply GAAR to reduce unutilized tax attributes where they could be used non-abusively

Draft amendments to override the Wild line of cases would extend the concept of “tax benefit” in s. 245 to include inter alia increasing or preserving a tax attribute that “could” be utilized at a future juncture, with a similar change to be made to the “tax consequences” definition. Although the intent is to permit the GAAR to apply to transactions that affect tax attributes that have not yet become relevant to computing tax, there are uncertainties as to when this is appropriate.

For example, in a variant of the Deans Knight situation where the losses had not yet been utilized, should the reasonable tax consequences have included a reduction of those loss balances if they might be utilized by “a same or similar” business? Furthermore, what if there are reasonable arguments that the corporation whose losses had been “preserved” is continuing to carry on the same or similar business, and the “structuring” steps were only undertaken to provide greater certainty?

The authors suggest:

[I]t is far from certain that tax attributes can be successfully eliminated through the new proposals unless it is impossible to articulate a credible non-abusive future use of those attributes … .

Neal Armstrong. Summary of Anthony V. Strawson and Trent J. Blanchette, “GAAR Amendment Targets Tax Attributes Before They Are Used,” Tax for the Owner-Manager, Vol. 22, No. 3, July 2022, p. 6 under s. 245(2).