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By: Florence Marino B.A., LL.B., TEP | Vice President, Tax & Estate Planning

More good news from the CRA concerning their take on the new GAAR. In addition to post-mortem pipeline planning being OK (Post-mortem pipelines under the new GAAR are OK), many common tax and estate planning transactions were also confirmed to be OK.

In #2024-1008251I7 the CRA confirmed the conclusions reached in the examples provided in IC-88-2 “The General Anti-Avoidance Rule – Section 245 of the Income Tax Act” dated October 21,1988 and the Supplement issued July 13, 1990.

Examples provided in these prior documents that were not considered GAAR-able then will not be considered GAAR-able now. These examples provide simple descriptions of many of the staples of tax and estate planning. Estate freezes, purification for purposes of the lifetime capital gains exemption, crystallizing the capital gains deduction, butterfly transactions, sale of business to an arm’s length Purchaseco, were listed to name a few.

What this tells us about the new GAAR from the CRA’s point of view is that it will not change where the line was previously drawn by them. We think what will change is the CRA will be more likely to succeed when they do make a GAAR challenge because GAAR will be stronger. And this may have the desired deterrent effect on taxpayers since the penalty would be too great if they do not disclose the transaction and the CRA is successful in their challenge. For our thinking on the new GAAR see (GAAR- Pretty Chilly right now).

Bill C-59 contains the new GAAR. It has received second reading as of March 18, 2024 and is currently in committee with the House and Senate Standing Committees on Finance.

FOOTNOTE:

This publication is protected by copyright. Tompkins Insurance is not engaged in rendering tax or legal advice. TOMPKINSights contains a general discussion of certain tax and legal developments and should not be construed as tax or legal advice.

Should you wish to discuss this or any other TOMPKINSights article, please contact
florence@tompkinsinsurance.com

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