Only lawyers` fees paid in connection with the income described above are eligible for deduction. All otherwise creditable attorneys` fees that are not deductible because they exceed that income may be deferred and deducted in up to one of the following seven years, provided that other associated income arises and that the amounts in question have not previously been deductible. On the payments side of the equation between the payment of alimony and receipt, the situation is not as favourable, as a deduction for lawyers` fees incurred for a person providing assistance is generally not allowed. Specifically, as stated in the CRA Guide, a person who provides assistance cannot claim the lawyer`s fees incurred to “determine, negotiate, or dispute the amount of support payments.” ¶ 29. An employee who is entitled to deduct expenses under Article 8(1)(f) (see current version IT-522, Employee Vehicle, Travel and Selling Expenses) may deduct reasonable amounts paid during the year for legal expenses arising from an event which, by its very nature, is a risk normally related to the performance-related activity. For example, a real estate agent may deduct attorneys` fees to defend against allegations of misrepresentation related to an aborted sale of real estate. However, legal expenses would not be deductible if they were of a capitalistic or personal nature. An expense to protect the agent`s licence to earn real estate commissions and an expense directly attributable to a car accident that occurred while using the vehicle for personal purposes are examples of capital or personal expenses. ¶ 25. Within the limits laid down in point (o.1) of point 60, a taxable person may deduct legal costs paid for the recovery or establishment of a right to a retirement benefit or an old-age allowance. The term “retiring allowance” is defined in subsection 248(1) and is broad enough to include damages or severance pay for the unlawful dismissal of the taxpayer (see also the current version of IT-337, Retiring Allowances).
Lawyer`s fees for the collection or establishment of a right to a retirement benefit or a retirement benefit of a deceased person are also eligible expenses under section 60 (o.1) if the taxpayer who made the payment and claimed the deduction was a dependent relative or legal representative of the deceased. Eligible court costs under paragraph 60(o.1) do not include court costs related to the division or liquidation of property resulting from the dissolution or dissolution of a marriage. Under Article 252(4)(b), the breakdown of a marriage includes the breakdown of a matrimonial relationship between two parties referred to as spouses in subparagraph 252(4)(a). Lawyers` fees related to benefits under the Canada Pension Plan or a similar provincial plan are not eligible under subsection 60(o.1), but a deduction for such expenses may be available under paragraph 60(o) (see “sections 7 and 8 above”). ¶ 16. Legal and accounting expenses incurred in combating an offer to take control of a company are not deductible as current expenses or as eligible capital expenditure. These costs relate to the ownership of the shares themselves (i.e. the capital structure of the company) and are not designed to generate or generate income from a company. The legal and accounting fees incurred during successful business acquisitions are usually investments that can be added to the cost base of the acquired shares. The treatment of attorneys` and accounting fees in the event of failure of attempts to acquire shares is discussed in the current version of IT-143, i.e.
eligible capital expenditures. This bulletin also discusses the legal and accounting costs of incorporation, reorganization and merger. ¶ 28. It is not always necessary that the fees for the matters described in point 8(1)(b) or paragraph 60(o)(1) be paid to a lawyer. For example, an employee whose services are terminated could use the services of an industrial relations consultant to negotiate severance pay. The fees paid to the consultant in this case will be recognized, depending on the circumstances, as lawyers` fees, which are deductible in accordance with § 8 paragraph 1 letter b or paragraph 60 paragraph 1. While there are certain circumstances in which such a deduction may be claimed, these circumstances generally do not include the common reasons – buying a home, divorce, determining custody, or seeking legal advice on drafting a will or administering a family estate – for which most Canadians incur legal fees. In general, personal lawyers` fees (as opposed to business-related lawyers` fees) become deductible for most Canadian taxpayers only if they accumulate to collect amounts they believe are owed to them, and if those amounts include employment or employment-related income or, in some cases, family support.
¶ 17 Legal costs incurred in determining entitlement to spousal support, such as the costs of obtaining a divorce, a spousal support order under the Divorce Act, or a separation agreement, are not deductible because these costs are due to the capital or are personal or living expenses. However, since children have a pre-existing statutory right to support or maintenance, the legal costs of obtaining a support order are deductible. Legal fees for attempting to receive an increase in spousal or child benefits or for failing to make child support taxable under the Federal Child Support Guidelines are not deductible. Revenu Québec has the same rules, except that the payer of the assistance (and not only the recipient, as in the case of the Canada Revenue Agency) can also deduct the lawyer`s fees related to the establishment or modification of the assistance. In some situations, an employee or former employee applies for legal aid to receive or establish entitlement to pension or pension benefits. In such cases, the lawyer`s fees incurred may be deducted up to the total amount of the pension allowance or pension income actually received for that year. When a portion of the retiring allowance or retirement benefits received in a given year is paid into an RRSP or registered pension plan, the amount of contributions is deducted from the total amount received when calculating the maximum allowable deduction for lawyers` fees. However, if all legal fees incurred in the current year cannot be claimed, they can be deferred for one of the following seven taxation years and claimed on the tax return. ¶ 8. All costs granted or reimbursed to a taxpayer in relation to expenses deducted or deductible pursuant to point (o) of paragraph 60 shall be included in the revenue in accordance with point (l) of Article 56(1) for the year in which the award was received.
As indicated in point 4 above, any reimbursement of these costs, if other legal and accounting fees have been deducted in accordance with the general provisions of the law, will reduce the expenses initially authorized. ¶ 14. Attorney`s and accounting fees incurred in the purchase of capital real estate are usually included in the cost of ownership. In the case of depreciable immovable property, the right to a capital exemption is based on the total cost of capital, including those costs. Pursuant to subsection 40 (1), any expenses or expenses (including attorneys` fees or accounting fees) incurred for the purpose of disposing of property are added to the adjusted cost base of the property to calculate the amount of the capital gain, capital loss, final loss or loss of business investment. resulting from the planning. ¶ 19. The legal fees described in point ¶ 18 are deductible, even if an amount received as a “child benefit amount” as described in paragraph 56.1, paragraph 4, is not included in the recipient`s income. Although “exempt income” is defined in subsection 248(1) as assets received or acquired that are not included in income, the definition excludes “amounts of support”; Consequently, the deduction of costs incurred in respect of maintenance amounts is not refused as exempt income in accordance with Article 18(1)(c).
An explanation of the “amount of support” and the “amount of child support” can be found in the current version of IT-530, Support Payments.
