8 April 1992 Income Tax Severed Letter 9206175 - Legal Fees Marital Breakdown Family Law

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

SUBJECT: LEGAL FEES MARITAL BREAKDOWN FAMILY LAW SECTION: 18(1)(a), 56(l)(c.1)

920617
XXX R.B. Day
(613) 957-2136

April 8, 1992

Dear Sirs:

We are writing in reply to your letter of February 20, 1992, wherein you requested clarification of Revenue Canada's position regarding the deductibility of legal fees incurred in connection with marital breakdown as set out in paragraphs 16 and 17 of IT-99R4.

In this regard you made reference to comments in a letter from this Directorate dated June 11, 1987, relative to the following comments in paragraph 17 of IT-99R4:

• "However, legal costs incurred in obtaining a court order described in 16(b) above, are considered to be deductible in computing the individual's income where the individual must sue the spouse or a person described in subparagraph 56(1)(c.1)(iii) for maintenance in a Family Court or under legislation such as the Family Services Act of New Brunswick, Part III of the Family Law Act of Ontario or other similar legislation. The latter types of expenses are considered to relate to the enforcement of a pre-existing right provided by law, ..."

With respect to our letter, you noted that our opinion indicated that, where legal costs incurred relate to an application to a Family Court for support payments (such that the legal costs would have been incurred to enforce a preexisting right under the Family Law Act of Ontario or similar legislation) these costs would be deductible by the payer thereof.

In this respect, you wish to know if the Department's position as stated in the letter of June 11, 1987, is still in effect. In the alternative, you wish to know if our position in the June 11, 1987, letter would differ if the support action was commenced under the Divorce Act (Canada) rather than under the Family Law Reform Act of P.E.I. The Family Law Reform Act of P.E.I., as you understand it, would be considered to be "similar legislation" as discussed in paragraph 17 of IT-99R4.

Our Comments

The position set out in our letter of June 11, 1987, continues to be valid and is supported by the comments set out in paragraph 17 of IT-99R4 as cited above.

It is our opinion that legal costs incurred with respect to a support action commenced under the Divorce Act, rather than the Family Law Reform Act of P.E.I., would be considered to be costs incurred to establish the right to payments and not the enforcement of a preexisting right under relevant family law. The following comments in paragraph 17 of IT-99R4 support this view:

• "Legal Costs incurred in establishing the right to the payments described in 16(a) above, such as the costs of obtaining a divorce, a support order under the Divorce Act or a separation agreement, are not deductible as these costs are on account of capital or are personal and living expenses."

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszycki
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental Affairs Branch