1. Tax Lesson 26 YOURLOGO Start Lecture
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2. General Anti-Avoidance Rule (GAAR)
GAAR can stop a tax plan from working, since if GAAR applies the tax benefit (from a tax plan) will be denied. The CRA has stated that they will not apply GAAR to typical tax planning situations such as bonusing down to the small business deduction limit, using section 85 to incorporate a sole proprietorship, purifying a company to get the capital gains exemption, basic estate planning, et cetera. GAAR typically applies to complex tax planning that appears to misuse or abuse the Act
GAAR applies if a transaction, or series of transactions, is done primarily to obtain a tax benefit and results in a misuse or abuse of the Act
GAAR does not apply to transactions done primarily for business or estate planning purposes
Also, it is not easy for the CRA to prove that a tax plan is a misuse or abuse of the Act and GAAR typically only applies to complex tax plans. You need to use your judgment to determine if you think GAAR would apply since if GAAR applies your tax plan does not work (and you don’t want to be involved with a tax plan that does not work)