Which of the following statements regarding GAAR is true?
A)The purpose of GAAR is to catch tax evaders.
B)When an avoidance transaction takes place, the anti-avoidance rule is automatically applied in all circumstances.
C)Canada Revenue Agency states that "A transaction will not be an avoidance transaction if the taxpayer establishes that it is undertaken primarily for bona fide business, investment or family purposes."
D)Individuals who organize their affairs in order to pay as little tax as possible will automatically be subject to GAAR.

Question

Quizplus · Accepted Answer

GAAR, or General Anti-Avoidance Rule, is a provision in tax law that allows tax authorities to disregard or recharacterize transactions that have been made solely for the purpose of avoiding taxes. However, a transaction will not be considered an avoidance transaction if the taxpayer can establish that it is primarily for bona fide business, investment, or family purposes. The purpose of GAAR is not solely to catch tax evaders, but to prevent abusive tax avoidance. It is not automatically applied in all circumstances when an avoidance transaction takes place, and individuals who organize their affairs in order to pay as little tax as possible are not automatically subject to GAAR.

Which of the Following Statements Regarding GAAR Is True