25 April 1994 External T.I. 9409865 - LEGAL EXPENSES

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.

				5-940986
XXXXXXXXXXJ. Teixeira

April 25, 1994

Dear Madam:

This is in reply to your letter of April 18, 1994 wherein you requested our opinion on whether legal and appraisal costs incurred by your client are deductible for the purposes of computing his taxable income and if so, in what year will these costs be deductible.

In your letter you have outlined an actual fact situation related to a completed transaction. The review of such a transaction will be the reponsibility of the District Office at which the taxpayer's income tax return is filed and it is not the practice of the Department to comment on such transactions when the identity of the taxpayer is not known. However, we can provide you with the following general comments which we hope will be of assistance to you.

The Department's general views concerning the treatment of legal fees for tax purposes are stated in Interpretation Bulletin IT-99R4. The question of whether legal or appraisal fees are on account of current expenses or are capital outlays must be determined on the basis of the facts in each case. Legal expenses incurred to preserve an existing capital asset or to acquire a capital asset are payments on account of capital, and are therefore not currently deductible, by virtue of paragraph 18(1)(b) of the Income Tax Act.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch