Quinco Financial – Tax Court of Canada states that taxpayers can be required to apply GAAR to themselves
On similar facts, Bocock J followed J.K. Read in rejecting a taxpayer argument that as a taxpayer could not apply GAAR to itself without CRA intervention, interest did not start accruing respecting denied capital losses until the CRA GAAR assessment rather than from the balance due-date for the year of the losses’ utilization. He noted that on its plain wording, s. 161(1) “imposes interest ‘at any time after a taxpayer’s balance-due day’ where tax payable exceeds amounts paid on account of tax for the year,” and that “to not impose interest from the balance-due day… renders GAAR ineffective in nullifying the deferral portion of the ‘tax benefit’.” Although he perhaps could have stopped there, he also stated:
[A]ll taxpayers, who are directly subject to GAAR assessments, that is, non-third parties, are required to consider and apply GAAR. Taxpayers who are directly or may be directly subject to the nullification of a tax benefit need not ask the Minister for permission to apply GAAR.
This suggests that taxpayers are required to exercise their own judgment under s. 245(2) as to the tax consequences of avoidance transactions “as is reasonable in the circumstances in order to deny a tax benefit that…would result, directly or indirectly” from the transactions.
Neal Armstrong. Summary of Quinco Financial Inc v. The Queen, 2016 TCC 190 under s. 161(1).