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:
(1) Whether certain legal fees are deductible for tax purposes.
(2) Whether certification costs and other fees related to the appointing of a curator are deductible for tax purposes.
Position:
(1) Question of fact.
(2) No.
Reasons:
(1) The expenses must satisfy the criteria in the Act for deductibility of legal fees.
(2) These costs would be considered to be personal living expenses.
2000-003720
XXXXXXXXXX A. Seidel
(613) 957-2058
September 15, 2000
Dear Sir:
Re: Deductibility of Legal Fees
This is in reply to your letter dated July 7, 2000 in which you requested our views as to whether legal fees, certification costs and other fees incurred in respect of the appointment of a curator for an individual are deductible for tax purposes.
The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R3 ("IC-6R3"), it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.
As outlined in paragraphs 1 and 2 of Interpretation Bulletin IT-99R5, except for certain specific provisions in the Income Tax Act (the "Act") which permit the deduction of legal fees, legal fees are generally an allowable deduction only in those situations where they are incurred in connection with normal activities, transactions or contracts incidental or necessary to gaining or producing income from a business or property and where the outlays are not considered to be a capital expenditure.
Generally, legal fees incurred for the purpose of establishing a curator and for the certification of court documents, to be used for presentation at banks, hospitals, government offices and in any situation where decisions or actions are taken on behalf of an individual under curatorship, in a situation where there is a long term and irreversible medical problem, such as mental incapacity, would be considered a personal living expense of the individual and are, therefore, not deductible in computing income for tax purposes.
There may be situations where a curator is appointed to carry on a business or administer income producing properties of an individual. In such situations, provided that all of the other requirements for deductibility of legal costs can be satisfied, ie. they are not outlays of a capital nature, the legal costs associated with the appointment of the curator may be a deductible business expense (since they are incurred for the purpose of gaining or producing income from a business), or considered to have been incurred for the purpose of gaining or producing income from property and therefore deductible in computing income from property for tax purposes.
Fees paid by an individual relating to the certification of court documents and other fees paid pursuant to a provincial statute to oversee the curatorship of an individual would generally be considered to be personal or living expenses and are, therefore, not deductible in computing income for tax purposes pursuant to paragraph 18(1)(h) of the Act.
The publications referred to in this letter may be obtained from your local tax services office or from our Internet web site (www.ccra-adrc.gc.ca).
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content