Fink Estate v. R., [1997] 3 C.T.C. 2493

Taylor T.C.J.:

1 This is an appeal heard in London, Ontario, on June 11, 1997 against an assessment of the T3 tax return for the fiscal year January 1, 1995 to June 15, 1995, which resulted in re-allocation of income reported not only for that period but for income reported in the T1 terminal tax return for the period January 1, 1994 to November 16, 1994 and for the T1 Rights and Things return for the period November 17, 1994 to December 31, 1994. That allocation — which had started as the only item at issue was resolved and agreed to by the parties according to the attached Consent to Partial Judgment dated June 10, 1997. That Consent to Judgment was “partial” only because the Agent for the Appellant Estate - Mr. Walter Butz raised a further issue — the deducibility of certain accounting fees from the income reported and allocated as above. The parties agreed to have this further issue adjudicated by the Court.

2 The accounting fees at issue - all charged by Mr. Butz, and supported by some documentation were as follows:

3 As I understand the testimony of Mr. Butz, the first two accounts above had been paid, the $825.00 out of estate funds by the solicitors for the estate, the second for $1,125.00 directly from the Executrix. The third account for $860.00 had not yet been submitted to the Executrix for payment - although, Mr. Butz stated he was certain it would be paid promptly.

4 The issue was whether any of these amounts should be treated as a deduction from the agreed upon income amounts (see above) for tax purposes.

5 Counsel for the Respondent disposed of the first account — $825.00 by noting that it was strictly for the preparation of an income tax return and not deductible under these circumstances as he understood the Act, specifically Section 18(1)(a) thereof.

6 On the second amount — $1,125.00, while Mr. Butz was of the view that part of this amount had been for preparation of the T3 returns, some of it related to the ongoing dispute with Revenue Canada regarding the allocation finally agreed upon as noted in the “Consent to Partial Judgment” above. However it was pointed out to Mr. Butz that this could not have been the case since his account was dated June 20, 1995, whereas the impugned assessment was not dated until September 12, 1995. Again therefore the account of $1,125.00 should not be deductible, as it did not come within the terms of Section 60(o) of the Income Tax Act, according to Counsel for the Respondent.

7 Finally, the third account for $860.00 which does deal with “preparing, instituting, or prosecuting an objection to; or an appeal --” falls short of the terms of the same Section 60(o) of the Act“paid by the taxpayer in the year” when that phrase is interpreted in the light of the definitions available from Section 104(23) of the Act, according to Counsel.

8 I do point out that in presenting his argument in this matter it appeared to me that Counsel had taken a very liberal view of the section of the Act involved in attempting to meet and possibly agree to the contentions of Mr. Butz. In simple terms, if there had been any basic merit to the claims for deduction it would have surfaced in the analysis provided by Counsel. I have made no attempt to further dissect, distinguish or relate the various sections of the Act to which Counsel referred, since in my opinion no purpose could be served by an assertion that perhaps even those sections provided little basis at all for considering the proposition of Mr. Butz. The “fiscal year” of the Estate January 1, to June 15, 1995 was selected by the Estate — a period shorter than the full twelve months which could be allowed — for a very good purpose as Mr. Butz saw it, to get the required clearances for the Estate and wind up the matter early. Whether that worked against Mr. Butz, or whether any opportunity should be granted for an application from the Estate to change those dates is not in issue before the Court in this matter, and I do not deal with those points. The contentions of Counsel for the Respondent serve as the basis to reject the appeal.

9 The appeal is allowed to the extent of including in income the following amounts —

10 In all other respects, the appeal is dismissed.