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:
Can a payer of support payments deduct the legal expenses incurred to enforce the support agreement ?
POSITION TAKEN:
No.
Reasons FOR POSITION TAKEN:
No Provision in the Act
XXXXXXXXXX 2000-002122
C. Tremblay
June 16, 2000
Dear XXXXXXXXXX:
Re: Legal fees
This is in reply to your letter of April 11, 2000, addressed to the Taxation Center in P.E.I., of which you sent a copy to our Directorate. You seek the Canada Customs and Revenue Agency's comments with regards to the deductibility of legal expenses in the following situation.
From XXXXXXXXXX, you have been paying child support in accordance with the guidelines established by the Family Responsibility Office of the Ministry of the Attorney General. You have also been paying an additional $XXXXXXXXXX per month for your two children's extraordinary activities. Your ex-wife has been pursuing legal action in an attempt to have the support payments increased. You have incurred considerable legal costs in order to contest your ex-wife's application for additional child support.
You have stated that while it is usually the person seeking the support who has to seek legal assistance in order to enforce a pre-existing right to a support amount, in your case it is the person who is providing the support that has to seek legal assistance to enforce an existing court order. Accordingly, you believe the relevant passages from paragraph 37 of Interpretation Bulletins IT-530 and paragraph 18 of Interpretation Bulletin IT-99R5 are support for your claim for a deduction for the legal expenses incurred.
The situation described in your letter is an actual completed and ongoing fact situation, accordingly your enquiry should be addressed to your local Tax Services Office. However, we offer the following general comments.
There is no provision in the Income Tax Act (the "Act") authorizing the deduction of legal expenses incurred to contest the payment of support. This is consistent with the decision established in Pierre Bergeron v The Queen (99 DTC 1265) (informal procedure).
From the payer's standpoint, legal costs incurred in negotiating or contesting an application for support payments are not deductible since these costs are personal in nature. Furthermore, since the payer does not have a source of income as to which these legal expense may reasonably be regarded as wholly applicable to, the rules in subdivision b of Division B of the Act (computation of income or loss from a business or property) do not apply. Finally, in reference to paragraph 18 of IT-99R5, it would generally be our view that the payer, in the circumstances you have described, has a pre-existing obligation and not a "pre-existing right" to support amounts.
We trust our comments are of assistance.
Your truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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