No, it is smarter than that. Or it has been since January.
My wife does it all the time too on 506, back, forth, back, forth, forth again, back, back again. I never see her get a free trip unless the location is screwed up. Hmm, that being said she did get one yesterday, after stopping at Gerrard/Coxwell to stop, but first leg was on 506C, and second was on 506 north from Eastwood and Coxwel (RBC) - which isn't a usual 506 stop, so that might have thrown it off. BUT, looking at data, she didn't get it on June 26, June 16, June 13, June 12 (3 charges in 2 hours), June 6 (though does seem to have had free trip - 5 trips that day ... 3rd trip was tap in at Woodbine to take 92 bus south, must have walked home from Gerrard. But then 20 minutes later started new 506 trip westbound ... and voila free trip; but tap 55 minutes later to come back Eastbound on 506 from Coxwell was charged as new trip - as it always is.
It's true it doesn't always know the route. It seems to try and cobble something together automagically based on GPS location; I tapped once on a new streetcar heading east on King at Sherbourne. It was signed as a 501 Leslie, Nextbus said it was a 509, so heading back to yard after shift; but they still had transfers activated, and the one I took, said 504. And then when I transferred to a 504 at Broadview I got an extra charge.