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.
Principal Issues:
In a custody/support case, what allocation of legal fees goes to each component. What supporting documentation is required for the allocation.
Position TAKEN:
It is a question of fact whether any portion of the legal fees may be deductible (ie. does the right pre-exist). Assuming the support portion of the fees are deductible, a reasonable allocation should be made. No documentation is required at the time the deduction is made, however, supporting documentation should be retained by the taxpayer in case the reasonableness of the allocation is questioned.
Reasons FOR POSITION TAKEN:
The question posed was of a general nature and a more precise answer to the question could not be provided.
L. Barrows
XXXXXXXXXX 950824
Attention: XXXXXXXXXX
July 11, 1995
Dear sir:
Re: Legal Fee Deductions for Alimony or Maintenance
We are replying to your letter of March 17, 1995 concerning the above referenced subject. We apologize for not being able to respond sooner.
You have asked for guidance with respect to the application of paragraphs 16 to 18 of IT-99R4 (the Bulletin) in determining what legal costs are deductible in obtaining court orders involving custody/support actions. Specifically, you have asked how Revenue Canada allocates legal costs between custody and support for deduction purposes and what supporting documentation is required to make this allocation.
It is a question of fact whether the legal fees for the support portion are deductible pursuant to a court order (ie. does the right pre-exist or has a new right been established). Assuming the fees for the support portion are deductible, again, it will depend on the circumstances of the particular case as to what allocation between custody and support is reasonable. While no supporting documentation is required at the time the deduction is made, we recommend that the taxpayer retain receipts, statements of account, etc. in the event that the reasonableness of the allocation is subsequently questioned by the Department.
We trust these comments will be of assistance to you.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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