After the taxpayer was wrongfully dismissed, an arbitrator ordered that the taxpayer be reinstated and be paid his back pay. The corporate employer wrongfully refused to reinstate the taxpayer, and the taxpayer obtained a court order for damages, reimbursement of legal costs and interest.
After finding that the damages were a retiring allowance and the reimbursement amounts were to be included pursuant to s. 56(1)(l.1), the Directorate stated:
The taxpayer will be able to deduct, pursuant to paragraph 60(o.1), an amount in respect of legal expenses to recover or establish an entitlement to the retiring allowance. The deduction of those expenses is subject to the limit allowed under that paragraph. Paragraph 23 of Interpretation Bulletin IT-337R4 explains the limit … .