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:
Deductibility of legal fees in computing employment income given a specific situation.
Position:
General comments provided; it is necessary to review all the relevant facts and documentation surrounding the case.
Reasons:
Paragraph 8(2) and 8(1)(b).
XXXXXXXXXX 2001-008554
Randy Hewlett, B.Comm.
August 3, 2001
Dear XXXXXXXXXX:
Re: Deduction of Legal Fees Line 232 (Other Deductions)
We are writing in response to your letter dated April 23, 2001, wherein you requested our opinion on the deduction of legal fees on Line 232 (Other Deductions) of your 1999 tax return.
XXXXXXXXXX
The situation presented is an actual fact situation involving completed transactions. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Subsection 8(2) of the Income Tax Act (the Act) provides that no deduction may be made in computing an individual's income from an office or employment, except as permitted under section 8. Paragraph 8(1)(b) of the Act permits an employee to deduct, in the computation of income from an office or employment, legal expenses paid to collect or establish a right to salary or wages owed to the employee by an employer or a former employer.
In order for you to claim legal expenses, they would have to relate to action that comes within the purview of the phrase "to collect or establish a right to salary or wages owed by an employer" as used in paragraph 8(1)(b) of the Act. The legal action must have been successful in establishing that your award was in fact salary and wages that was confirmed by the court to have been owed to you by your employer. A review of all the facts and documentation surrounding your case would be required before a determination could be made on the deductibility of the legal fees.
We trust our comments will be of assistance to you. If you require further assistance, please contact Ms. Danielle Bissonnette, Assistant Director, Client Services Division, Montreal Tax Services Office.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
b.c.c. Danielle Bissonnette
Assistant Director, Client Services Division
Montreal Tax Services Office
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