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:
Follow-up to our letter in file 992821, to clarify the time of application of the position explained in that letter.
Position TAKEN:
The only prior years that could be reassessed, as a result of the above-noted change in position, are those years for which a notice of objection had been filed and is still outstanding, and those years for which a notice of objection can still be filed.
Reasons FOR POSITION TAKEN:
As indicated in the Notice at the end of IT-99R5, and in the Index to interpretation bulletins, when there is a change in a previous interpretation or position, including a change resulting from a court decision, and the change is beneficial to taxpayers, such as the above change relating to legal fees for child support orders, it is usually effective for all future assessments and reassessments.
XXXXXXXXXX 2001-006800
February 21, 2001
Dear XXXXXXXXXX
Re: Legal Fees - Child Support
This is further to our letter of November 18, 1999 (our file number 992821), regarding legal fees incurred in respect of child support orders under the Divorce Act.
As you may recall, in our previous letter we indicated that, in our view, legal fees incurred in establishing the right to spousal support under the Divorce Act are not deductible, but that we have accepted that legal fees to obtain child support orders are deductible, as we have accepted that children have a pre-existing right, arising from legislation, to maintenance, regardless of whether the child support order is obtained pursuant to the Divorce Act or to provincial legislation. Paragraphs 17 and 18 of IT-99R5 have since been revised to reflect this position.
However, it has recently come to our attention that we provided you misleading information in our previous letter with respect to the time of application of the above position, in that we indicated that the above was not a change in position. Paragraph 17 of IT-99R5 formerly indicated that legal costs incurred in establishing the right to support amounts, such as the costs of obtaining a divorce or a support order under the Divorce Act were not deductible as these costs were viewed as being on account of capital, or as personal or living expenses. This position was supported by the Federal Court-Trial Division case of Burgess, 81 DTC 5192. Accordingly, the position explained in the paragraph above, and in revised paragraphs 17 and 18 of IT-99R5, is in effect a revision of our previous position. This new position reflects recent jurisprudence, (Wakeman, [1996] 3 C.T.C. 2165, which was subsequently upheld in McColl, 2000 DTC 2148 and in Sol, 1999-4153(IT)I), as well as our review of the provisions of the Divorce Act and provincial family law statutes.
As indicated in the Notice at the end of IT-99R5, and in the Index to interpretation bulletins, when there is a change in a previous interpretation or position, including a change resulting from a court decision, and the change is beneficial to taxpayers, such as the above change relating to legal fees for child support orders, it is usually effective for all future assessments and reassessments. Accordingly, the only prior years that could be reassessed, as a result of the above change in position, are those years for which a notice of objection had been filed and is still outstanding, and those years for which a notice of objection can still be filed. Generally, a taxpayer can file a notice of objection for a particular year up to one year after the date on which the return for that year was due.
We apologize for any inconvenience that our previous letter may have caused you.
Yours truly,
Milled Azzi, C.A.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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