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Docket: 2001-1662(IT)I
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BETWEEN:
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JAMES ATKINSON,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Appeal heard on November 17, 2003 at Toronto,
Ontario
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Before: The Honourable Justice L.M. Little
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Appearances:
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For the Appellant:
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The Appellant himself
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Counsel for the Respondent:
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Edward Park
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____________________________________________________________________
JUDGMENT
The
appeal from the assessment made under the Income Tax Act
for the 1998 taxation year is allowed, without costs, and
the assessment is referred back to the Minister of National
Revenue for reconsideration and reassessment in accordance with
the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 30th day of June
2004.
Little J.
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Citation: 2004TCC445
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Date: 20040630
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Docket: 2001-1662(IT)I
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BETWEEN:
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JAMES ATKINSON,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little J.
A. Statement of
Facts:
[1] The Appellant was employed by the
City of Toronto as a Policeman.
[2] Criminal charges were laid against
the Appellant in connection with his activities as a
Policeman.
[3] The Appellant retained a lawyer to
defend his position against the criminal charges.
[4] The Appellant was successful in
defending the false allegations that had been made against
him.
[5] The Appellant paid legal fees of
$32,226.49 to his counsel in defending his position.
[6] The Appellant deducted legal fees
of $32,226.49 when he filed his income tax return for the 1998
taxation year.
[7] The Minister of National Revenue
(the "Minister") disallowed the legal fees that were
claimed by the Appellant.
B. Issue:
[8] Is the Appellant allowed to deduct
legal fees in the amount of $32,226.49 in determining his income
for the 1998 taxation year?
C. Analysis:
[9] The Appellant testified that if he
had not successfully defended his position against the groundless
criminal charges that had been made against him he would have
lost his position as a Policeman and he would have lost his right
to receive a pension from the City of Toronto (see Exhibit
A-3).
[10] I accept the Appellant's testimony
to the effect that the Appellant would have lost his right to
receive a pension if he had not defended himself against the
false allegations.
[11] Subsection 60(o.1) of the Income Tax
Act (the "Act") reads as follows:
(o.1) the amount, if any, by which the
lesser of
(i) the total
of all legal expenses (other than those relating to a division or
settlement of property arising out of, or on a breakdown of, a
marriage or common-law partnership) paid by the taxpayer in the
year or in any of the 7 preceding taxation years to collect or
establish a right to an amount of
(A) a benefit under a
pension fund or plan (other than a benefit under the Canada
Pension Plan or a provincial pension plan as defined in
section 3 of that Act) in respect of the employment of the
taxpayer or a deceased individual of whom the taxpayer was a
dependant, relation or legal representative, or
(B) a retiring allowance
of the taxpayer or a deceased individual of whom the taxpayer was
a dependant, relation or legal representative, and
(ii) the amount, if
any, by which the total of all amounts each of which is
(A) an amount described in
clause (i)(A) or (B)
(I) that is received
after 1985,
(II) in respect of which
legal expenses described in subparagraph (i) were paid, and
(III) that is included in
computing the income of the taxpayer for the year or a preceding
taxation year, or
(B) an amount included in
computing the income of the taxpayer under
paragraph 56(1)(l.1) for the year or a preceding
taxation year,
exceeds the total of all amounts each of which is an amount
deducted under paragraph (j), (j.01), (j.1)
or (j.2) in computing the income of the taxpayer for the
year or a preceding taxation year, to the extent that the amount
may reasonably be considered to have been deductible as a
consequence of the receipt of an amount referred to in clause
(A),
exceeds
(iii) the portion of the
total described in subparagraph (i) in respect of the
taxpayer that may reasonably be considered to have been
deductible under this paragraph in computing the income of the
taxpayer for a preceding taxation year;
[12] It will be noted that subsection
60(o.1) provides that a taxpayer may deduct legal expenses paid
to collect or establish a right to a pension. In this situation
by defending himself against the groundless criminal charges laid
against him, the Appellant established his right to receive a
pension under the pensions provided for policemen employed by the
City of Toronto.
[13] I have concluded that the Appellant is
entitled to deduct legal fees in the amount of $32,226.49 by
virtue of subsection 60(o.1) of the Act.
[14] The appeal is allowed, without
costs.
Signed at Vancouver, British Columbia, this 30th day of June
2004.
Little J.
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