Wickham Estate – Tax Court of Canada denies pro rata portion of an investment management fee based on the portfolio's RRIF portion

Fees awarded by the Public Trustee to a retired investment manager (Sanders), who was the committee of the senile taxpayer (Ms. Wickham), qualified for deduction under s. 20(1)(bb) except for 20% thereof, which was denied under s. 18(1)(u) based on the 20% of her portfolio which was held in her RRIF. Although acting as committee was Sanders’ only relevant activity, it qualified as an investment management business under s. 20(1)(bb).

The income generated by the portfolio substantially exceeded his fees. Before turning to s. 20(1)(bb), Paris J stated: "since the management services provided by Mr. Sanders related to capital assets held by Ms. Wickham, the fees would be non-deductible capital expenditures unless otherwise provided." This is inconsistent with the deductibility of fees incurred in order to earn interest or dividends (Wilson).

The s. 18(1)(u) finding is problematic for any practice of paying investment advisor fees only out of the taxable portion of a portfolio, and deducting them in full rather than pro-rating based on the portfolio's RRSP portion.

Neal Armstrong. Summaries of Wickham Estate v. The Queen, 2014 TCC 352, under s. 20(1)(bb), s. 18(1)(u) and s. 18(1)(b) – capital expenditure v. expense – investment management.