REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether, in 2013,
the Appellant was entitled to deduct the amount of $4,989.73 pursuant to
paragraph 8(1)(b) of the Income Tax Act. The amount claimed consisted of
the following:
|
Jurisprudence Exams
|
$
437.00
|
|
Travel Expenses for Jurisprudence Exams
|
1,407.00
|
|
Urine Tests
|
393.50
|
|
Legal Fees
|
2,752.23
|
|
|
|
Facts
[2]
The Appellant has been a pharmacist since 1990.
From 1990 to 2013, she worked as an employee at various pharmacies in Sydney,
Nova Scotia. In 2013, three complaints of professional misconduct were made
against her under the Pharmacy Act of Nova Scotia. The Nova Scotia
College of Pharmacists held a discipline hearing with respect to the complaints
and concluded that the proper method of disposing of the complaints was to
enter into a Settlement Agreement with the Appellant.
[3]
According to the Settlement Agreement, the
Appellant’s licence to practice pharmacy in Nova Scotia was suspended from
August 21, 2013 to February 21, 2014. The Appellant was required to satisfy
various conditions, including, enrolling, and successfully completing an Ethics
Course at Mount Saint Vincent University in Halifax, Nova Scotia.
[4]
The amount of $4,989.73 claimed by the Appellant
in 2013 was incurred in respect of her legal representation at the discipline
hearing and the conditions in the Settlement Agreement which she had to
satisfy.
Law
[5]
Paragraph 8(1)(b) reads:
8 (1) In
computing a taxpayer’s income for a taxation year from an office or employment,
there may be deducted such of the following amounts as are wholly applicable to
that source or such part of the following amounts as may reasonably be regarded
as applicable thereto
Legal expenses of
employee
(b) amounts paid
by the taxpayer in the year as or on account of legal expenses incurred by the
taxpayer to collect, or to establish a right to, an amount owed to the taxpayer
that, if received by the taxpayer, would be required by this subdivision to be
included in computing the taxpayer’s income;
Position of the Parties
[6]
It was the Appellant’s position that all of the
expenses claimed by her were legal expenses because they were incurred as a
result of the complaints under the Pharmacy Act.
[7]
Her representative argued that the expenses were
deductible because the Appellant could not practice as a pharmacist if she had
not paid these amounts. He stated that the expenses were incurred to preserve
the Appellant’s ability to earn an income. There was a direct connection
between the expenses claimed and the income earned by the Appellant.
[8]
It was the Respondent’s position that paragraph
8(1)(b) does not allow a taxpayer to deduct a legal expense which is incurred
to preserve the ability to earn income.
Analysis
[9]
All of the costs incurred by the Appellant were
not legal expenses. Only the amount of $2,752.23, which the Appellant paid to
defend against the complaints filed with the Nova Scotia College of
Pharmacists, was a legal expense. Regardless, I have concluded that none of the
amounts claimed by the Appellant are deductible pursuant to paragraph 8(1)(b)
of the Act.
[10]
Paragraph 8(1)(b) has a narrow scope. It is
intended to apply where an employee has incurred legal expenses in attempting
to collect unpaid salary or wages, or in attempting to settle a dispute with an
employer or former employer with respect to the amount of salary to which the
employee is entitled: Fenwick v The Queen, 2008 FCA 370 at paragraph 7.
Neither of those scenarios existed in the present appeal.
[11]
In the present appeal, the Appellant incurred
legal expenses so that she could continue to practice as a pharmacist in Nova
Scotia. The facts in this appeal are similar to those in Blagdon v The Queen,
[2002] CTC 2332 (TCC). In Blagdon, the taxpayer’s Master’s Certificate
was suspended. He had to appear at an enquiry and write an examination to
protect his professional qualifications and to continue to earn income from
employment as a ship’s captain. Captain Blagdon argued that paragraph 8(1)(b)
should be interpreted broadly to permit a deduction for legal expenses incurred
to protect one’s entitlement to pursue a particular livelihood. In dismissing
Captain Blagdon’s appeal, Bowman, A.C.J.T.C., as he then was, stated at
paragraph 15:
Paragraph 8(1)(b)
permits the deduction of legal expenses incurred to collect or establish a
right to salary or wages.
Captain Blagdon
appealed this decision to the Federal Court of Appeal. In dismissing his appeal
at Blagdon v The Queen, 2003 FCA 269, the Court stated:
5 We are
all of the view that the Tax Court Judge was correct in his interpretation of
paragraph 8(1)(b). We do not accept that the words of paragraph 8(1)(b) can
reasonably bear the interpretation proposed by counsel for Captain Blagdon. We
can understand that a broad entitlement to a deduction for legal expenses for
persons in the situation of Captain Blagdon might be justified on policy
grounds but that is a matter for Parliament not the courts.
[12]
It is clear that the amount of $4,989.73 was not
incurred by the Appellant to collect or establish a right to salary or wages.
It was incurred to allow her to preserve a future right to work as a pharmacist.
[13]
The appeal is dismissed.
Signed at Halifax, Nova Scotia, this 27th day of July 2016.
“V.A. Miller”
Email this Content