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.
R.J.L. ReadSection ChiefAuthorResearch FileCorporate Case Fileor Subject FileReturn to Rulings Directorate, Room 300, Met.
MEMORANDUM FOR MR. DENIS LEFEBVRE
SUBJECT: 19(1) Deductibility of Legal Fees
The purpose of this memorandum is to brief you on the matters raised in a memorandum from M. Serge Mercille to you dated November 5, 1990. As we understand it 24(1)
Except where there is a specific provision in the Income Tax Act, such as paragraphs 8(1)(b) or 60(o), legal fees are only deductible if they:
• are incurred for the purpose of gaining or producing income from a business or property, and
• are not outlays of a capital nature.
In each case, the question of whether or not the payment of legal fees to defend against criminal charges can meet the deductibility criteria set out above is a question of fact which depends upon the relationship of the conduct in question to the taxpayer's income earning activities.
We have been advised that 19(1) had no business or property income in the years in question to which the charges related. Accordingly, the above fees are not deductible by him in computing business or property income.
Under paragraph 8(1)(b) of the Act, a taxpayer may deduct legal fees incurred in collecting salary or wages owed to him by his employer or former employer. 24(1) 60(o) of the Act deals with expenses relating to objections and appeals under the Income Tax Act which is not applicable in this case.
If additional facts pertaining to 19(1) claim become available, I would be pleased to review the matter further.
R.J.L. ReadDirector GeneralRulings DirectorateLegislative and Intergovernmental Affairs Branch
R.D. Weil/dc(957-2141)November 15, 1990
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