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Supreme Court Shoots Down Lipson – Effect on Smith Manoeuvre?

supreme-court-mortgage-case The Supreme Court of Canada has ruled against a complex strategy to make mortgage interest tax deductible. 

The court said the defendants, Earl and Jordanna Lipson, effectively abused tax laws.

According to the Calgary Herald:  "The scheme involved paying down their mortgage immediately after obtaining it, then using the repaid principal as collateral for an investment loan, which is tax deductible under the Income Tax Act."

There's no clear indication yet on if/how this may affect the popular Smith Manoeuvre.  The Smith Manoeuvre is different in many key respects but there is at least some overlap in principal. 

The Globe's Rob Carrick, for one, suggests it might not impact the Smith Manouevre.  He quotes a tax lawyer that says the ruling has no effect on borrowing against one's home to invest and making the interest tax deductible.

We'll take some time to research and get opinions on the verdict and then report back.

Here is the Supreme Court's decision:  Lipson v. Canada


Note: This story is for general interest only and not advice! As always, seek professional tax counsel before jumping into any tax-related strategy.