Kondor – Tax Court of Canada finds that legal fees incurred in order to preserve an illiquid investment were non-deductible capital expenditures

The taxpayer incurred legal fees in order to protract the settlement of claims of his separated wife. Although this sounds like a personal matter, Graham J found that the fees had been incurred in order to avoid having to liquidate a private company investment on a disadvantageous basis, so that they were incurred for an income-producing purpose.  However, as by the same token, the fees were incurred to preserve a capital asset, they were non-deductible capital expenditures.

Thus, two generations later, there is continuing fall-out from the misquoting by Kerwin J in Dominion Natural Gas of the traditional formulation of capital expenditure – which referred to "an expenditure… made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade" (British Insulated and Halsby Cables) – as instead including expenditures made "with a view of preserving an asset or advantage for the enduring benefit of a trade."

Neal Armstrong. Summary of Kondor v. The Queen, 2014 TCC 303 under s. 18(1)(a) – legal fees.