Specific Anti-Avoidance Rules

A specific anti-avoidance rule is a legislative measure to cancel the tax benefit of a planning scheme identified as aggressive by lawmakers.

For example, the 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 
• the conversion of dividends into capital gains eligible for an exemption under the tax system

Timeframe for applying the rules

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

We can also redetermine the income tax for which an earlier assessment was made. In this case, however, we must generally make a reassessment within three years following the day the notice of original assessment is sent to the taxpayer. This period extends to four years where the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation.