CRA GAAR / Aggressive Planning Audit — Montreal CPA Firm Near You: Substance Over Form

A CRA GAAR (General Anti-Avoidance Rule) or Aggressive Tax Planning Audit is one of the most complex and high-stakes reviews a business or taxpayer can face. When the Canada Revenue Agency believes a transaction, while technically legal, was designed primarily to avoid tax rather than achieve a genuine business objective, it invokes GAAR under section 245 of the Income Tax Act. Mackisen CPA Montreal provides strategic defense for corporations, professionals, and investors facing GAAR audits — ensuring every transaction is documented, justified, and aligned with the substance-over-form principle recognized by Canadian courts.

Legal Foundation

Law: Income Tax Act s. 245 — General Anti-Avoidance Rule (GAAR); Excise Tax Act s. 274 — avoidance under GST/HST law.
Jurisprudence: Canada Trustco Mortgage Co. v. Canada (2005 SCC) — established the modern three-part GAAR test: (1) tax benefit, (2) avoidance transaction, and (3) misuse or abuse of the Act’s provisions.

Learning insight: GAAR isn’t about what you did — it’s about why you did it. The CRA tests intent, not arithmetic.

Why CRA Applies GAAR

CRA’s Aggressive Tax Planning Division uses GAAR to challenge complex reorganizations, share transfers, cross-border structures, and financing strategies that appear motivated primarily by tax reduction. These audits typically span multiple years and often involve legal counsel, forensic accountants, and CRA’s special investigations unit.

Common GAAR triggers include:

• Surplus stripping and pipeline transactions using sections 84.1 or 55.

• Artificial capital losses or debt-forgiveness arrangements.

• Circular inter-company loans and dividend distributions.

• Share reorganizations lacking clear commercial purpose.

• Complex partnership or trust structures designed solely for deferral.

Mackisen CPA Montreal ensures that your planning withstands the GAAR test by documenting the commercial rationale and aligning it with judicial principles.

Learning insight: CRA sees aggressive planning as abuse — Mackisen CPA proves it’s strategy.

The Mackisen CPA GAAR Defense Framework

1. Transaction Review: Our CPAs and tax specialists dissect every step of the transaction, identifying both its form and substance.

2. Commercial Purpose Analysis: We prepare detailed memoranda showing legitimate business reasons — such as risk management, financing efficiency, or succession planning.

3. Legal and Economic Documentation: We assemble contracts, board minutes, valuations, and professional opinions proving commercial intent.

4. Jurisprudence Alignment: We cite supporting case law, including Canada Trustco, Copthorne Holdings, and Deans Knight Income Corp. (SCC, 2023).

5. Negotiation and Representation: Mackisen CPA communicates directly with CRA’s GAAR Committee and Appeals Division to resolve disputes before reassessment.

Learning insight: GAAR cases are won through narrative clarity — the ability to show that business purpose outweighed tax savings.

Common CRA Audit Focus Areas

• Surplus Stripping: Use of capital-gain structures to extract corporate funds tax-free.

• Corporate Reorganizations: Step transactions that lack economic substance.

• Cross-Border Tax Planning: Use of low-tax jurisdictions without genuine business presence.

• Hybrid Financing: Inter-company debt with artificial interest deductions.

• Loss Trading: Acquisition of loss corporations without legitimate integration of business.

Mackisen CPA Montreal provides proactive documentation and step-by-step defense for each structure challenged under GAAR or its provincial equivalents.

Learning insight: Every step in a tax plan must tell the same story — from intent to outcome. If one step breaks form, CRA sees abuse. Mackisen CPA makes sure it doesn’t.

How Mackisen CPA Strengthens GAAR Defense

• Conducts GAAR Risk Assessments before audit escalation.

• Drafts commercial-substance reports demonstrating alignment with industry practice.

• Coordinates with legal counsel for privilege-protected documentation.

• Prepares detailed rebuttals citing relevant court precedents and CRA policy interpretations.

• Negotiates settlement or withdrawal of GAAR reassessments through administrative resolution.

Learning insight: GAAR audits are less about fighting and more about framing — the side that explains purpose clearly wins.

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Learning insight: Tax strategy becomes tax avoidance only when the purpose is hidden. Mackisen CPA’s documentation brings transparency to your intent.

Real Client Success

• A Québec holding company successfully defended a $1.4M GAAR reassessment after Mackisen CPA proved the reorganization supported genuine succession planning, not tax avoidance.

• A real-estate group avoided penalties under section 245 when we demonstrated legitimate refinancing motives for inter-company debt restructuring.

• A private equity firm reduced a $3.2M adjustment to zero when Mackisen CPA documented the business need for parallel limited partnerships.

Learning insight: GAAR defense isn’t about loopholes — it’s about logic, evidence, and law.

Why Mackisen CPA Montreal

Mackisen CPA Montreal is a leader in corporate tax planning and audit defense, combining over 35 years of expertise in taxation, forensic accounting, and legal interpretation. Our bilingual CPAs work alongside tax lawyers to defend reorganizations, mergers, and transactions challenged under GAAR. We believe that sound planning is not aggressive — it’s intelligent.

Learning insight: CRA challenges perception; Mackisen CPA defends purpose. Every transaction you make should stand up to both.