Specific Anti-Avoidance Rules

A specific anti-avoidance rule is a legislative measure to eliminate the tax benefit of a planning strategy lawmakers have identified as abusive. 

For example, legislation provides specific rules to prevent: 

  • the use of tax-free inter-corporate dividends to reduce the capital gain resulting from the sale of shares; 
  • the conversion of dividends into non-taxable capital repayments; and 
  • the conversion of dividends into capital gains eligible for an exemption under the tax system.

Deadline for applying the rules

In general, for a particular taxation year, we determine the income tax payable and issue the taxpayer a notice of original assessment. 

We can also redetermine the amount of income tax for which an earlier assessment was made. Such a reassessment must generally be made, however, within three years of the day the notice of original assessment is sent to the taxpayer. That said, the period is extended to four years where the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation. 

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