CRA relaxes its published policy on deductibility of fees under s. 20(1)(bb) paid to a securities dealer

CRA has now published a more accommodating position than set out in 1990 regarding whether fees paid by clients of securities dealers for the management of their portfolios (e.g., fees calculated as a percentage of the assets in the portfolio) are deductible under s. 20(1)(bb). That provision provides for the deductibility of a fee paid for “advice as to the advisability of purchasing or selling a specific share or security of the taxpayer” or for “services in respect of the administration or management of shares or securities of the taxpayer” where the principal business of the service provider is “advising others as to the advisability of purchasing or selling specific shares or securities, or … includes the provision of services in respect of the administration or management of shares or securities.”

CRA stated that:

[I]t is reasonable to assume that the principal business of a person licensed as a securities dealer is to advise on the advisability of purchasing or selling shares or securities or to provide services in respect of the administration or management of shares or securities.

and that fees (other than “commissions” – as to whose meaning CRA was somewhat nebulous) paid to a securities dealer:

would be fully deductible pursuant to paragraph 20(1)(bb) provided that they are reasonable in relation to the services received and that they are in respect of the administration or management of shares or securities.

Neal Armstrong. Summary of 8 October 2021 APFF Financial Strategies and Instruments Roundtable, Q.1 under s. 20(1)(bb).