16 November 1989 Income Tax Severed Letter 3-2733 - [891116]

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.

J.A. Szeszycki (613) 957-2103

NOV 16 1989

Dear Sirs:

Re: XXXX

We are responding to your October 4, 1989 request for an advance income tax ruling on behalf of the above-noted taxpayers.

You have requested an advance income tax ruling with respect to the taxability of legal and accounting fees paid by XXXX in connection with charges and being laid by Revenue Canada, Taxation against XXXX under the authority of section 242 of the Income Tax Act (the "Act") in the hands of, XXXX as a benefit under either paragraph 6(1)(a), subsection 15(1) of alternatively, subsection 246(1) of the Act.

We have reviewed the circumstances as set out in your submission and find that the issues involve questions of fact, the full disclosure of which may prove prejudicial to the underlying case between the taxpayer and Revenue Canada. In addition, we note that item #5 of the statement of facts reproduces articles 190 and the Articles of Association and that these articles direct that XXXX indemnify its officers and employees from any costs resulting from things done by him" in their capacity as officers and servants of XXXX Consequently, the transaction ensures the payment of legal and accounting fees on behalf of XXXX or any other officer or employee is considered to be a completed rather than a proposed transaction. In view of the above we are unable to consider your request for an advance ruling.

With respect to your request for an opinion regarding payments of legal and accounting fees already made, we make reference to Interpretation Bulletin IT-99R3 - Legal and Accounting Fees, which sets out at paragraph 19 the Department's position with respect to fees incurred in connection with a prosecution under section 239 of the Act. Paragraph 17 of that publication may also have application. Where a personal expense is incurred by an employee and paid for by the employer, a taxable benefit normally accrues to the employee unless it can be determined that the primary benefit derived from the expense is enjoyed by the employer. Such a determination must be made on the basis of all the information available. In this regard, refer to our previous comments concerning full disclosure of information.

We regret being unable to provide you with a more definitive response. Your deposit cheque in the amount of $325.00 will be returned by separate cover.

Yours truly,

ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR P.D. FUOCO

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch