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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Will the CCRA change its position outlined in paragraphs 17 and 18 of IT-99R5 (Consolidated) and deny all taxpayers a deduction for legal costs incurred in relation to support payments following the decision of the Tax Court of Canada in the case of Pierre Bergeron v. The Queen, 99 DTC 1265.
Position: No.
Reasons: No clear indication from the courts to apply the reasoning in Bergeron.
XXXXXXXXXX 2002-013370
Patrick Massicotte, CA, M.Fisc.
June 26, 2002
Dear XXXXXXXXXX:
Re: Legal Costs - Support Payments
We are writing in response to your letter of April 4, 2002, wherein you requested our comments regarding the deductibility under the Income Tax Act (the "Act") of legal costs incurred in relation to support payments.
You particularly enquire whether changes are expected to be brought to the position outlined in Interpretation Bulletin IT-99R5 (Consolidated) in light of the decision of the Tax Court of Canada in the case of Bergeron v. The Queen, 99 DTC 1265.
Written confirmation of the tax implications arising from 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 pursuant to Information Circular 70-6R5. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. However, we are prepared to provide you with some general comments which may be of assistance.
We have examined the comments of Judge Archambault in the case of Bergeron v. The Queen as well as previous and subsequent court decisions on the issue of deductibility of legal costs associated with claims for child or spousal support.
We note that the reasoning adopted in that case has not been widely accepted by other judges of the Tax Court of Canada, as reflected by Judge Bowie's comments in the most recent case of Sabour v. The Queen, 2002 DTC 3813, [2002] 1 C.T.C. 2585 (TCC-Inf.). Moreover, all the decisions adopting the position developed in Bergeron have been made under the Informal Procedure which, as you know, should not be treated as precedents for any other case pursuant to section 18.28 of the Tax Court of Canada Act.
Therefore, we do not intend to change the position outlined in paragraphs 17 to 21 of Interpretation Bulletin IT-99R5 (Consolidated) as a result of the Bergeron case. The Department of Finance has advised us that it agrees with our position from a tax policy perspective and is considering the possibility of amending the Act to clarify the situation.
We trust the above comments are of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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