6 October 2006 APFF Roundtable Q. 21, 2006-0195981C6 F - Deductibility of Professional Fees - Reorg. -- summary under Legal and other Professional Fees

Fees for legal opinions and fairness opinions obtained by a public corporation in connection with a proposed offer to repurchase a portion of its shares would be capital expenditures as such fees would be incurred in connection with a reshaping of the corporation's capital structure.

Similarly, fees paid for a fairness opinion obtained in connection with a proposed amalgamation of a corporation would be considered to be capital expenditures. CRA stated:

[M]erger costs are normally described as capital expenditures because such amounts are not expended as part of the money-earning process. These expenses rather have the effect of enlarging the structure within which the profits are earned, [with] the effect of modifying such structure permanently or in an enduring way. Finally, merger costs can be considered as expenditures made once and for all, with a view to bringing into existence an advantage of enduring benefit for the business of the merging corporations and for the business of the corporation resulting from the merger.

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