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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Are legal costs incurred in connection with an Ontario Municipal Board hearing regarding the rezoning of farm property from rural to agricultural status deductible under 20(1)(cc)?
Position: Yes.
Reasons: The legal fees meet the conditions in 20(1)(cc) and the Ontario Municipal Board is a public body performing a function of government in Canada.
May 12, 2000
XXXXXXXXXX Tax Services Office HEADQUARTERS
David Shugar
Attention: XXXXXXXXXX
2000-000173
Legal Costs - Farm Property
This is in reply to your enquiry of January 5, 2000 concerning the deductibility, under paragraph 20(1)(cc) of the Income Tax Act (the "Act"), of legal costs incurred by farmers, in connection with making representations to the Ontario Municipal Board, supporting the rezoning of their farm property from rural to agricultural status. The requests for rezoning are due to the farmers' concern that under rural zoning, it is possible for their non-farming neighbours to successfully apply to have local government enact regulations that would restrict farm operations, such as regulations governing the types of livestock allowed and hours of operation of noisy machinery. The farmers believe that under agricultural zoning, such restriction on farming operations are not likely to be enacted.
We can offer the following general comments which should be of assistance to you, however, it is important to note that each case should be decided based on its own facts.
Paragraph 11 of Interpretation Bulletin IT 99R5 states: "Paragraph 20(1)(cc) allows a deduction to a taxpayer for certain expenditures, generally of a capital nature, incurred and paid in making any representation relating to a business carried on by the taxpayer (including any representation made for the purpose of obtaining a license, permit, franchise, patent, or trademark) to a government or public body or to a regulatory agency thereof."
The term "public body" is not defined in the Act and must, therefore, be considered to have the meaning assigned to it by dictionaries and common usage. In Carswell's 'The Dictionary of Canadian Law' (2nd Edition) "public body" is defined as:
"Public body (I) The government of Canada or a province; (ii) a crown corporation, board, commission or agency of a government; (iii) a municipality; (iv) a body elected or appointed under an act: (A) to develop, administer or regulate schools, hospital, health facilities, libraries, water utilities, drainage and irrigation works, sewage works, local improvements or public utilities; or (B) to levy and collect taxes."
In our view, the Ontario Municipal Board is a municipal or public body performing a function of government. Therefore, legal fees paid, in connection with making representations to the Ontario Municipal Board, relating to a business carried on by a taxpayer, would be deductible in the year paid under paragraph 20(1)(cc) of the Act. A taxpayer who is entitled to deduct an amount under paragraph 20(1)(cc) of the Act may, in lieu of that deduction elect, under subsection 20(9) of the Act, to deduct one tenth of the amount in each of the ten consecutive years beginning with the year in which the expenditure is made.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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