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) The 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) GAAR can correctly be defined as "Organizing one's affairs in a manner that results in paying the least amount of tax possible."

Question

Quizplus · Accepted Answer

The Canada Revenue Agency (CRA) provides guidance on GAAR and states that transactions will not be considered avoidance transactions if they are primarily undertaken for bona fide business, investment, or family purposes. Option A is incorrect as the purpose of GAAR is to prevent sophisticated tax avoidance schemes, not catch tax evaders. Option B is incorrect as the application of GAAR is subjective and depends on the specific facts and circumstances of each case. Option D is incorrect as GAAR is meant to target artificial and abusive tax avoidance schemes, not legitimate tax planning.

Which of the Following Statements Regarding GAAR Is True