RRLLB81 Assignment 3 PORTFOLIO (QUALITY ANSWERS) Semester 1 2026 - Tax planning and impermissible tax avoidance

This document provides detailed workings, clear explanations, and well-structured solutions for the RRLLB81 Assignment 3 PORTFOLIO (QUALITY ANSWERS) Semester 1 2026 ... Tax planning and impermissible tax avoidance Background A taxpayer is allowed to plan his financial affairs to reduce a tax liability. The arrangement of a taxpayer’s financial affairs could include, investing in tax-free savings accounts, contributing to retirement funds for tax purposes, employing a permissible tax deduction for business expenses and so on. Tax avoidance on the other hand entails an "arrangement" entered into with the sole purpose of deriving a tax benefit, and the transaction must have a tainted element. A taxpayer can incorporate a close corporation with the sole purpose of reducing a tax liability. This would be a legitimate business arrangement even if the sole purpose of the transaction is to reduce a tax liability. A person is therefore not precluded from converting a partnership to a close corporation to derive financial benefit for his business. A clear legal problem could exists here, a business person could be penalised merely on the grounds of restructuring their business for efficiency and profitability. From this standpoint, it is hard to argue that a transaction of incorporating a close corporation amounts to an impermissible tax Downloaded by Pied Zulu () lOMoARcPSD| 54 avoidance and it should resemble a tainted transaction. Conduct research about the GAAP (anti-avoidance rules) and provide your opinions about their legal feasibility.