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.
XXXXXXXXXX 992311
C. Tremblay
Attention: XXXXXXXXXX
November 15, 1999
Dear XXXXXXXXXX:
This is in reply to your letter of August 16, 1999, wherein you ask whether legal fees incurred by a taxpayer to seek an increase in the amount of child support payable under the Divorce Act and/or the Family Law Act are deductible.
In our view, regardless of whether an amount is initially quantified through an action commenced under a provincial family statute or under the Divorce Act, the legal costs with respect to a subsequent court challenge to increase the support payments are not deductible. We have taken the position, as stated in paragraph 17 of Interpretation Bulletin IT-99R5, that legal fees incurred to increase the quantum of support are capital in nature and thus not deductible. In our view, legal fees incurred to defend the quantum from reduction, as was the situation in The Attorney General of Canada v Norma McCready Sembinelli (FCA) 94 DTC 6636, can be distinguished from a situation where legal fees are incurred in a court challenge to increase support. Once a right to support has been established and quantified, a subsequent court challenge to increase the amount can be seen as an attempt to establish a new right, whereas, it is the previously quantified right which is being challenged in a case where the recipient defends against a reduction in the quantum of child support.
For greater certainty, since you referred to the Wakeman decision, generally, we have accepted the position that children have a pre-existing right, arising from legislation, to maintenance regardless whether the support is obtained pursuant to the Divorce Act or provincial legislation. Paragraph 17 of IT-99R5 will be amended to clarify that its comments with respect to the Divorce Act are in the context of spousal support only. However, as indicated above, the Canada Customs and Revenue Agency's position with respect to legal fees incurred to seek an increase in the amount of child support payable has not changed.
We trust our comments are of assistance
Your truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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