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.
Principal Issues: Are fines and penalties levied by the Investment Dealers Association deductible?
Position: No
Reasons: The IDA is authorized under provincial securities legislation to govern and regulate members in order to ensure compliance with that legislation. As such, it is the CRA's view that section 67.6 applies to deny a deduction
XXXXXXXXXX
November 21, 2007
Dear XXXXXXXXXX:
Thank you for your email received on October 17, 2007, concerning the deductibility of penalties or fines imposed by the Investment Dealers Association of Canada.
Subject to certain proposed prescribed exceptions, section 67.6 of the Income Tax Act provides that no deduction shall be made in respect of any amount that is a fine or penalty imposed under a law of a country or a political subdivision of a country (including a state, province, or territory) by any person or public body that has authority to impose the fine or penalty.
The securities legislation of various provinces authorizes certain recognized self-governing organizations, such as the Investment Dealers Association of Canada, to govern and regulate members (through the organization's bylaws for example) in order to ensure compliance with the applicable provincial securities legislation. When this is the case, it is the view of the Canada Revenue Agency that fines and penalties applied under those bylaws are, in effect, imposed as a consequence of the law of a province as specified in section 67.6 of the Act. A deduction for the payment of such fines or penalties would therefore be denied.
You have also asked whether any members of the Investment Dealers Association of Canada have attempted to deduct such fines or penalties. The confidentiality provisions of the Act prohibit me from discussing a taxpayer's tax affairs with a third party without the taxpayer's written authorization. You will therefore understand that I cannot comment on this matter.
I appreciate the opportunity to address your concerns and trust that the information provided will be helpful.
Sincerely,
The Honourable Gordon O'Connor, P.C., M.P.
Renée Shields
(613) 957-2049
2007-025659
October 25, 2007
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