24(1)
5-903409
K.J. Donnelly
(613) 957-8953
19(1)December 18, 1990
Dear Sirs:
Re: Paragraph 20(1)(bb) of the Income Tax Act (the "Act")
We are replying to your letter dated November 29, 1990 concerning the application of paragraph 20(1)(bb) of the Act.
Where a stockbroker's principal business "...includes the provision of services in respect of the administration or management of shares or securities...", it is our opinion that if the stockbroker charges a reasonable fee other than a commission to a taxpayer for advice as to the advisability of purchasing or selling specific shares or securities of that taxpayer, such a fee would be deductible by that taxpayer pursuant to paragraph 20(1)(bb) of the Act, to the extent that is paid.
In addition, it is our opinion that if the same stockbroker charges a reasonable fee to a taxpayer for services in respect of the administration or management of shares or securities of that taxpayer, such fee would be deductible by that taxpayer pursuant to paragraph 20(1)(bb) of the Act, to the extent that it is paid.
It is a question of fact whether a particular stockbroker's principal business at a particular time includes the provision of services in respect of the administration or management of securities. The extent to which a particular fee satisfies the reasonableness test in section 67 is also a question of fact.
Our opinions are provided in accordance with the practice described in paragraph 21 of Information Circular 70-6R2 and are not binding on Revenue Canada, Taxation in respect of any transaction or taxpayer.
Yours truly,
for Director Financial Industries Division Rulings Directorate