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Old 02-24-2013, 12:58 PM
Mess Mess is offline
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Mess is a jewel in the roughMess is a jewel in the roughMess is a jewel in the roughMess is a jewel in the rough

Just to clarify this, Rioe, it is an issue because we claim the initial costs as a deduction against income, so no, the taxes have not been paid.

Imagine a gross income of $100k, and legal costs of $30k in 2012. We deduct the costs and pay tax on a net income of $70k.

The trial ended the last week of December. The judge gives the decision in January, or later. The costs are awarded in 2013.

We now have received a tax deduction for $30k, but have actually spent little or none of it.

The costs award must be added back into income. The only point I am unclear on, I vaguely recall a form to adjust expense deductions for a previous year. I am not sure if this would be the route, or if the CRA would rather the costs (that specifically applied to the intitial deduction) be treated as income in the year they are received.
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