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

A CRA GAAR (General Anti-Avoidance Rule) Audit targets transactions that, while technically legal, may be viewed by the Canada Revenue Agency (CRA) as abusive or primarily tax-motivated. These audits question the substance behind tax structures — from reorganizations and share transfers to complex estate or corporate plans.
Mackisen CPA Montreal provides professional audit defense, documentation, and coordination with legal counsel to demonstrate that every transaction serves a legitimate commercial purpose under Canadian tax law.

Legal Foundation

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

Learning insight: GAAR isn’t about how you filed your taxes — it’s about why you structured them that way. Mackisen CPA proves your planning is substance-driven, not tax-driven.

Why CRA Launches GAAR or Aggressive Tax Planning Audits

CRA’s Aggressive Tax Planning (ATP) Division identifies transactions that reduce taxes through technical loopholes rather than legitimate business goals. Common audit triggers include:

• Reorganizations that transform dividends into capital gains.

• Share redemptions and pipelines used for estate planning.

• Artificial capital losses or debt-forgiveness arrangements.

• Inter-company transactions lacking clear economic substance.

• Hybrid financing or circular loan arrangements.

• Cross-border structures exploiting tax treaty mismatches.

Learning insight: CRA doesn’t audit paperwork — it audits purpose. Mackisen CPA ensures your purpose is documented and defensible.

CRA’s GAAR Audit Process

1. Transaction Identification: CRA flags unusual tax structures or intercompany transfers.

2. Information Request: CRA requests corporate records, valuations, and agreements.

3. GAAR Analysis: CRA evaluates if the transaction has economic substance beyond tax benefit.

4. Proposal Letter: CRA issues a GAAR proposal outlining its findings.

5. GAAR Committee Review: Ottawa’s national committee reviews the file for legal consistency.

6. Assessment or Withdrawal: CRA issues a reassessment or withdraws the GAAR application based on defense strength.

Learning insight: GAAR audits aren’t about numbers — they’re about narrative. The story your documents tell must match your commercial intent.

Mackisen CPA’s GAAR Defense Strategy

1. Transaction Reconstruction: We map the complete flow of funds, assets, and contracts to show economic substance.

2. Purpose Documentation: Prove legitimate business rationale for each transaction step.

3. Legal and Economic Collaboration: Coordinate with tax lawyers to produce integrated opinions.

4. Comparative Benchmarking: Demonstrate industry-standard practices for similar transactions.

5. CRA Correspondence Management: Draft technical responses addressing each component of CRA’s GAAR analysis.

Learning insight: CRA argues intent — Mackisen CPA proves purpose.

Common CRA Findings in GAAR and ATP Audits

• Corporate reorganizations with no operational purpose.

• Estate freezes lacking clear succession planning.

• Dividend stripping under s.84.1 or s.55 deemed abusive.

• Loss transfers between related companies without integration.

• Hybrid debt/equity financing designed solely to defer tax.

Mackisen CPA Montreal rebuilds the evidence chain — linking each transaction to legitimate financial goals such as risk management, continuity, or business expansion.

Learning insight: GAAR defense succeeds when you can prove value creation beyond tax benefit.

Educational Case Study

A Québec holding company was reassessed under GAAR for converting retained earnings into capital gains via a share redemption. CRA alleged misuse of s.84.1. Mackisen CPA demonstrated that the transaction was part of a bona fide succession plan and supported by external valuations and shareholder resolutions. The GAAR application was withdrawn with no penalties.

Learning insight: CRA accepts complex planning when the facts show real business purpose. Mackisen CPA’s documentation makes that purpose visible.

SEO Optimization and Learning Value

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Secondary Keywords: CRA s.245 audit defense, corporate reorganization audit, GAAR penalty avoidance, Mackisen CPA tax planning Montreal, CRA ATP investigation.

Learning insight: SEO and audit defense share the same rule — authority through transparency. Mackisen CPA provides both.

Real Client Success

• A manufacturing group avoided a $1.8 million reassessment after Mackisen CPA proved their intercompany loans were commercially necessary for liquidity management.

• A family estate trust eliminated GAAR penalties when we demonstrated the reorganization’s primary goal was succession, not avoidance.

• A real-estate developer cleared a two-year CRA ATP audit after our defense aligned transactions with Canada Trustco jurisprudence.

Learning insight: CRA respects structure that makes sense — and penalizes structure that doesn’t. Mackisen CPA designs compliance that earns respect.

Why Mackisen CPA Montreal

Mackisen CPA Montreal combines 35 years of experience in tax audits, reorganizations, and GAAR defense. Our bilingual CPAs and legal partners specialize in corporate structures, estate freezes, and international planning under OECD and CRA frameworks. We defend clients by aligning their transactions with law, logic, and economic reality.

Learning insight: GAAR isn’t about aggressive tax planning — it’s about intelligent tax planning. Mackisen CPA ensures CRA sees the difference.