10 February 1989 Income Tax Severed Letter 5-7298 -  

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.

A. Seidel (613)957-8960

Attention: XXXX

February 10, 1989

Dear Sir:

This is in reply to your letter dated December 23, 1988 with respect to the application of paragraph 20(1)(e) of the Income Tax Act (the "Act") to mutual fund trusts.

Legal and audit fees and the costs of printing a prospectus are deductible for tax purposes pursuant to paragraph 20(1)(e) of the Act if they are incurred in the course of borrowing money used to earn income from business or property or in the course of an issuance or sale of units of a unit trust, interests in a partnership or syndicate, or shares of the capital stock of a corporation. In the situation described in your letter, it is our view that expenses are not incurred in respect of any of the above and are therefore not deductible pursuant to paragraph 20(1)(e) of the Act.

In the situation where legal and audit fees and printing and mailing costs are incurred on regular basis in compliance with regulatory authority requirements and to provide financial statements to unitholders, it is our view that the expenses would be deductible in calculating the income for a taxation year of the mutual fund trust pursuant to subsection 9(1) of the Act.

While we hope our comments are of assistance to you they do not constitute an advance income tax rulings and therefore are not binding on the Department in respect of a specific situation.

Yours truly,

for Director Financial Industries Division Rulings Directorate