Analysts have had a few days now to dissect the Lipson verdict. All the commentary thus far strongly indicates that the regular old Smith Manoeuvre is still a viable strategy.
Here’s more from various experts:
The Supreme Court said the case “has not established that, in view of their purpose, (the interest deductibility) provisions have been misused and abused.” (Advisor.ca)
Hence, “you can still borrow money against the equity in your home and use the proceeds to invest in the stock market and interest will be deductible,” says lawyer Evy Moskowitz of Moskowitz and Meredith (FP)
CPA and CIBC Wealth Management director, Jamie Golombek, agrees. “Plain-vanilla debt-swap refinancing seems to be alive and well in Canada,” he says. (Bloomberg)
“The focus of the court [was] really on the purpose of the attribution rules and whether they were misused, and the finding of the majority was they were.” says lawyer, Elizabeth Johnson, of Wilson and Partners (FP)
The key problem with the transaction occurred when Mr. Lipson applied Mrs. Lipson’s interest deduction to his income. This was not an arms-length transaction and was hence considered abusive by the court. (Investment Executive) This is a very different area than that of the regular Smith Manoeuvre.
Thus far, we have not seen anyone claim that the Smith Manoeuvre has been harmed by this verdict. That doesn’t mean you don’t need professional advice, however. As always, talk to a licensed tax and investment advisor before implementing this strategy because there are still risks.