10 June 2013 Roundtable, 2013-0480411C6 - STEP Roundtable – June 2013 - Question 10

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Deductibility of probate and related fees by an estate.

Position: Question of fact

Reasons: In our view, the Tax Court of Canada's decision under the informal procedure was based on the unique facts of the case.

2013 STEP CANADA ROUNDTABLE, June 10 & 11, 2013

QUESTION 10. Probate Fees and Related Cost Base Additions

In Brosamler Estate v R. 2012 TCC 204, the estate of a deceased non-resident person added a portion of the probate fees and legal fees (that it incurred to obtain the required ancillary probate in British Columbia) to the adjusted cost base of certain Canadian properties that was previously owned by the deceased. The Minister of National Revenue assessed the estate of the deceased, removing costs of probate and legal fees from the adjusted cost base. The estate appealed the Minister's reassessment and the Appeal was allowed. Can the CRA please comment on its views of this decision notwithstanding the decision was decided through the Informal Procedure of the Tax Court of Canada?

CRA Response

The CRA generally does not seek judicial review of decisions rendered under the informal procedure since they are not generally regarded as having precedential value pursuant to section 18.28 of the Tax Court of Canada Act. The fact that CRA did not appeal the Brosamler decision should not be regarded as precedential.

The CRA considers that the decision in Brosamler was based on the unique facts of the case and does not represent the CRA's view on the general rule. In Brosamler, the court found that in order to acquire the title in the properties sold by the estate, there had to be conveyance of the title from the deceased person to the estate, and the conveyance could not take place until the estate incurred the probate and legal fees. As such, the portion of the fees incurred by the estate to acquire that title could be added to the adjusted cost base ("ACB") of the two properties disposed of. The court further noted that even if the fees had not been added to the ACBs for the two properties, they would have been deductible in determining the capital losses on disposition of the properties, because the expense was incurred towards an actual disposition of the property by the estate.

As explained above, the Brosamler decision is derived from a very fact specific situation. The determination of whether probate fees related to real property situated in Canada might be eligible to be added to the adjusted cost base of the property or constitute an outlay or expense to dispose of the property will depend on the unique facts in a given situation. However, it is our view that as a general rule, probate fees will neither be added to the ACB of the estate property nor be considered an outlay or expense to dispose of estate property for the purpose of subsection 40(1), which establishes the general rules for gain and loss calculations.

William King
2013-048041