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

A CRA GAAR (General Anti-Avoidance Rule) or Aggressive Tax Planning Audit occurs when the Canada Revenue Agency (CRA) suspects that a transaction or corporate structure, while technically legal, was designed primarily to obtain a tax benefit rather than serve a genuine business purpose.
Mackisen CPA Montreal helps corporations, family trusts, and professional practices defend their tax strategies under section 245 of the Income Tax Act, proving that every transaction has commercial substance, economic purpose, and full compliance with Canadian tax law.

Legal Foundation

Law: Income Tax Act s.245 (General Anti-Avoidance Rule — GAAR); Excise Tax Act s.274 (anti-avoidance provisions for GST/HST); CRA Information Circular IC88-2R.
Jurisprudence: Canada Trustco Mortgage Co. v. Canada (2005 SCC) — established the three-part GAAR test:

1. Was there a tax benefit?

2. Was there an avoidance transaction?

3. Was the transaction abusive or a misuse of the Act’s purpose?

Learning insight: CRA doesn’t audit your creativity — it audits your intent. Mackisen CPA ensures your intent is documented, compliant, and clearly commercial.

Why CRA Targets Aggressive Tax Planning

CRA’s Aggressive Tax Planning (ATP) Division identifies transactions that exploit technical loopholes or result in undue tax advantages. Common triggers include:

• Corporate reorganizations structured for surplus stripping.

• Share redemptions or pipelines that convert dividends to capital gains.

• Artificial losses through partnerships or related entities.

• Hybrid loans or circular financing arrangements.

• Tax deferrals using offshore or related-company structures.

Learning insight: GAAR audits are not about numbers — they’re about purpose. Mackisen CPA proves your purpose is strategic, not artificial.

CRA’s GAAR Audit Process

1. Audit Notice: CRA identifies transactions and requests related contracts, board minutes, and tax opinions.

2. Transaction Analysis: CRA reviews whether the structure created a “tax benefit.”

3. Purpose Test: CRA assesses if the main objective was tax reduction, not business efficiency.

4. GAAR Committee Review: Ottawa’s national GAAR Committee reviews cases for consistency.

5. Assessment or Withdrawal: CRA either reassesses the transaction or withdraws the GAAR application based on defense strength.

Learning insight: CRA challenges what looks artificial. Mackisen CPA demonstrates what’s authentic — business purpose and documentation.

Mackisen CPA’s GAAR Defense Framework

1. Transaction Mapping: Rebuild the flow of funds and contracts to show commercial reality.

2. Purpose Documentation: Provide board resolutions, internal memos, and financial models supporting legitimate intent.

3. Economic Substance Report: Align transaction outcomes with operational business needs.

4. Legal Collaboration: Work alongside tax counsel to ensure arguments meet jurisprudence and CRA interpretation.

5. CRA Correspondence: Manage all auditor communications and provide structured written submissions.

Learning insight: CRA penalties stem from uncertainty — Mackisen CPA replaces uncertainty with structured, transparent proof.

Common CRA GAAR Findings

• Lack of documentation showing business rationale.

• Circular transactions that begin and end with the same funds.

• Overuse of holding companies or trusts for tax deferral without substance.

• Dividend conversions under s.84.1 without economic change.

• Hybrid instruments structured solely to reduce taxes.

Mackisen CPA prepares both financial and legal evidence to prove that transactions align with accepted tax principles, not avoidance motives.

Learning insight: GAAR defense is not about arguing — it’s about aligning facts with purpose.

Real-World Case Example

A Québec holding company faced a GAAR audit after converting retained earnings into capital gains through a reorganization. CRA alleged misuse of s.84.1 and s.55. Mackisen CPA demonstrated the transaction was part of a bona fide succession plan and not abusive under Canada Trustco. The GAAR assessment was withdrawn, saving over $1.2 million in taxes and penalties.

Learning insight: CRA respects structure that makes sense — Mackisen CPA builds that structure with precision and evidence.

SEO Optimization and Educational Value

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Learning insight: Authority in tax defense builds both compliance and search visibility. Mackisen CPA ranks because it educates — and defends because it documents.

Why Mackisen CPA Montreal

Mackisen CPA Montreal combines over 35 years of expertise in corporate audits, reorganizations, and GAAR defense. Our bilingual CPAs and tax-law partners specialize in proving commercial substance, documenting compliance, and preventing penalties.
We help clients turn complex tax structures into transparent, defensible strategies that meet both CRA and judicial standards.

Learning insight: GAAR isn’t a punishment for smart tax planning — it’s a test of documentation. Mackisen CPA ensures your evidence passes that test every time.

Call to Action

If CRA or the Aggressive Tax Planning Division has questioned your corporate structure, issued a GAAR proposal, or requested reorganization details, act before reassessment.
Contact Mackisen CPA Montreal today for a comprehensive GAAR defense and compliance review.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: GAAR audits test whether your tax plan was smart or suspect. Mackisen CPA Montreal ensures it stands as strategic, documented, and 100% defensible — turning complexity into compliance and innovation into integrity.