Gouveia - Federal Court of Appeal treats an individual’s reputation and income-earning capacity as a capital asset

Dawson JA briefly affirmed a finding of Favreau J that $2.1 million in legal fees incurred by a CEO, who also earned consulting fees from his income trust, mostly to defend against OSC charges respecting allegedly misstated financial statements, were non-deductible given that "deduction of legal fees incurred to preserve the [taxpayer’s] reputation and capacity to earn future income is prohibited by paragraph 18(1)(b)."

This is consistent with Cimolai and a judicial pattern of treating expenditures to preserve a capital asset as being capital expenditures.

Neal Armstrong. Summary of Gouveia v. The Queen, 2014 FCA 289 under s. 18(1)(a) – legal and other professional fees.