12 January 1982 Income Tax Severed Letter

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.

Peter K. Noack Tel. (613) 995-0051

January 12, 1982

Dear Sirs:

This is in reply to your letter of December 7, 1981. In your letter you refer to the answer given to Question 22 (Deductibility of Fees Paid to Trustees) put to the Revenue Canada Round Table at the 1981 Tax Conference of the Canadian Tax Foundation in Vancouver.

You ask us to review an itemized list of different types of duties performed by the typical trustee and to identify those duties that we would consider as being performed "for the purpose of gaining or producing income" and thus give rise to fees that would be deductible from income.

In this regard we would like to state again our position on the deductibility of trustees' fees as it was conveyed to the Tax Conference:

Trustee fees chargeable against income account are allowable where they meet the usual criteria necessary for deduction in the computation of income from business or property, viz. "made or incurred for the purpose of gaining or producing income from the business or property" - paragraph 18(1)(a), "not an outlay --- on account of capital" - paragraph 18(1)(b), "reasonable in the circumstances" - section 67.

Paragraph 20(1)(bb) requires consideration in the case of those fees charged to capital account and fees charged to income account that were not laid out to gain or produce income but were outlays on account of capital. Where the requirements of paragraph 20(1)(bb) are met all such fees are deductible.

It is not departmental policy that fees paid to individuals can never be categorized as amounts paid to a person whose principal business is advising on the purchasing or selling of securities or for services with respect to administration and management of shares or securities. However, paragraph 20(1)(bb) is applied strictly.

Without knowledge of all the relevant facts and circumstances in a given case, we could not attempt to identify certain types of trustees' fees or portions thereof as being deductible from income, with any certainty.

You also ask us to advise what would be suitable records to maintain to support the relative proportions of deductible and non-deductible fees. Subsection 230(1) requires the keeping of records and books of account "in such form and containing such information as will enable the taxes payable under this Act ... to be determined". It is not our practice to advise on the type of records to be kept to meet the requirements of subsection 230(1).

We regret that we are unable to answer your questions in a manner that would be more satisfactory to you. Any comments on the types of trustees' duties that would normally give rise to deductible fees may cause difficulties in interpreting actual cases in terms of the provisions of the Income Tax Act.

Yours Truly,

for Director Non-Corporate Rulings Division

PKN:ta

18(1) (a) 20(1) (bb)