Principal Issues: Whether, in a particular fact situation, legal fees and payments incurred or made by a taxpayer can be added to the cost of property inherited by such taxpayer.
Position: General comments provided.
Reasons: The situation described appears to involve specific taxpayers and completed transactions. Consequently, it was suggested to submit all relevant facts and documentation to the appropriate tax services office for their views. First, it should be determined whether a usufruct, right of use or habitation was established, pursuant to a will or otherwise. In such a case, the impact of subsection 248(3) should be considered. Secondly, it should be determined whether or not, for legal purposes, the taxpayer was truly the legatee by particular title of the property. The answer to this question would in turn determine whether subsections 70(5) and 107(2) would have applied to establish a cost, to the taxpayer, of the property. Finally, a portion of the expenses incurred and the payment made by the taxpayer could be part of the cost of the property if such expenses and payment were directly incurred or made to acquire the property. However, not enough information given in the particular situation to be able to make a final determination. The portion of the legal expenses that would simply be part of the cost of administering or settling the estate would neither be deductible nor added to the adjusted cost base of the property. Finally, none of the outlays or expenses would be deductible under paragraph 40(1)(a) (not incurred for the purpose of disposing of the property).