28 April 2000 Ministerial Letter 2000-0011888 - Public Trustee Fees

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: whether the public trustee fees paid to administer the estate of an incompetent are deductible

Position: no

Reasons: while such fees are necessary, they are not incurred to earn income from business or property and there is no other provision, including medical expense tax credit, that permits the deduction of such fees

April 28, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter of February 11, 2000, concerning the deductibility of fees paid to the Public Trustee on behalf of a mentally incompetent person. As you may be aware, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

The deductibility of fees for the services of a trustee is determined in relation to the facts of each case, taking into account the nature of the duties performed. If such an expenditure is made for the purpose of gaining or producing income from a business or property, it may be deductible in computing income for tax purposes subject to various statutory limitations. I understand that the Tax Court of Canada has considered the merits of the arguments raised in your letter in the context of your client's appeal which was dismissed on XXXXXXXXXX. The CCRA has no record of an application for judicial review of this matter being filed with the Federal Court of Appeal. As the time to do so has now expired, there are no further appeal rights with respect to this matter.

As there is no provision in the Income Tax Act under which the fees paid to the Public Trustee on behalf of XXXXXXXXXX are deductible, the CCRA is not in a position to permit a deduction of such an amount. The fact that the payment of these fees was mandatory in XXXXXXXXXX personal circumstances does not provide grounds for relief.

Although the present law is quite clear on the conditions which must exist in order for such fees to be deductible, the letter dated March 10, 1967, which accompanied your letter, was written in the context of the law as it applied under the 1952 version of the Act. The CCRA's position with respect to the deductibility of trustee fees under the present Act has been widely known since it was first announced at the 1981 Canadian Tax Foundation Conference.

I understand that Mrs. Annemarie Humenuk, an official of the Income Tax Rulings Directorate, telephoned your office on March 23, 2000, to discuss the issues raised in your letter. I also understand that you advised her that the tax payable by the Estate of the late XXXXXXXXXX is still outstanding. Payment of the outstanding balance would prevent further interest charges from accruing.

The role of the CCRA is to administer and enforce the Act as passed by Parliament while the Department of Finance is responsible for tax policy and any proposed changes to the legislation. Your suggestion that fees such as those paid by your client to the Public Trustee be made deductible under the Act or be treated as a medical expense relates to tax policy, which is the responsibility of the Department of Finance. It was therefore appropriate that you sent a copy of your letter to the Honourable Paul Martin, Minister of Finance, for his consideration.

Thank you for bringing your concerns to my attention.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

C.C. Mr. Munir A. Sheikh

Assistant Deputy Minister
Tax Policy Branch
Department of Finance