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.
Principal Issues: (A) Whether travel expenses such as motor vehicle expenses, meals, hotels would be deductible in computing investment income. (B) Whether initial and annual fees for registered accounts would be deductible in computing income.
Position: A) No.
B) No.
Reasons:
A) Paragraph 18(1)(h) applies. The expenses are personal or living expenses that were not incurred in the course of a business.
B) Paragraph 18(1)(u) applies.
XXXXXXXXXX 2009-032490
December 1, 2009
Dear XXXXXXXXXX
Re: Investment expenses
This is in response to your email correspondence dated May 10, 2009, in which you request our comments regarding the deductibility of investment expenses.
We understand that together with your wife, you hold various registered and non-registered investments. You recently revised your investment strategy and decided to transfer a portion of your holdings into XXXXXXXXXX (the "Investment Company"). In order to do so, you traveled to XXXXXXXXXX to comply with the Investment Company's requirement for a preliminary meeting. Furthermore, in order to transfer your registered investments to the Investment Company, it was necessary to invest through a trust company ("Trustco"). You ask whether you can deduct the travel expenses incurred in arranging your new registered and non-registered investments as well as the service charges levied by Trustco in respect of the registered account.
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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.
Travel expenses
A taxpayer's income from a business or property is the "profit" therefrom for the year, subject to the particular rules set out in Part I of the Act. For instance, paragraph 18(1)(a) of the Act provides that no outlay or expense is deductible in computing the income of a taxpayer from a business or property, unless it was made or incurred for the purpose of gaining or producing income. Further, and of particular relevance to your inquiry, paragraph 18(1)(h) of the Act denies the deduction of personal or living expenses incurred by a taxpayer, other than travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business. Because your travel expenses were not incurred in the course of a business, they constitute a non-deductible personal or living expense.
Service fees for registered accounts
Paragraph 18(1)(u) of Act is a provision that specifically denies an annuitant a deduction in respect of amounts paid for services in respect of a RRSP, RRIF or tax-free savings account. Accordingly, in computing your own income you are not entitled to deduct the Trustco charges related to your registered accounts.
As noted during a conversation on November 24, 2009 (Shields/XXXXXXXXXX ) the CRA is responsible for providing interpretations of income tax law, but not for developing and evaluating federal tax policy or amending income tax law. Federal tax policy and amendments to income tax law are the responsibility of the Department of Finance Canada. If you wish to pursue your concern further, you may contact the Tax Policy Branch of the Department of Finance Canada by writing to 140 O'Connor Street, Ottawa ON K1A 0G5.
We trust that our comments are of assistance to you.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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