Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether the CCRA should extend its policy outlined in ITTN #24 to allow the deduction of legal costs to taxpayers who pay support.
Position: No.
Reasons: The Act does not allow for such a result.
March 18, 2003
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter of February 13, 2003, concerning the deductibility of legal costs incurred to obtain support payments, as explained in the recent Income Tax Technical News No. 24. This is also further to your letters addressed to the Income Tax Rulings Directorate and to the Honourable Martin Cauchon, Minister of Justice and Attorney General of Canada.
The role of the Canada Customs and Revenue Agency (CCRA) is to administer and enforce the Income Tax Act as adopted by Parliament and interpreted by the courts. The CCRA is committed to applying the tax laws in a consistent and fair manner. However, the CCRA does not have the discretion or right to change the Act.
Legal costs incurred by the payer of support are not deductible under the Act. On the other hand, the recipient of support has a source of income for purposes of the Act against which the related legal costs may be deducted. The courts have consistently adopted this interpretation.
An amendment to the Act would be required in order for the payer of support to be entitled to claim related legal costs. Any amendments to the legislation would have to be considered by the Department of Finance. I note that it is appropriate that you have sent a copy of your letter to the Honourable John Manley, Minister of Finance, for his consideration.
I appreciate the opportunity to address your concerns.
Yours sincerely,
Bill McCloskey Assistant Commissioner Policy and Legislation Branch
c.c.: Mr. Stephen Richardson
Senior Assistant Deputy Minister
Tax Policy Branch
Department of Finance
140 O'Connor Street
Ottawa ON K1A 0G5
Patrick Massicotte
957-9232
March 4, 2003