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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 09-05-2012, 05:34 PM
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Default Claiming Legal Fees For Tax Deduction in Spousal Support Matters

Hi - I just received a letter from CRA not accepting the legal fees deduction I claimed (for establishing SS). HELP?? My deduction was accepted last year...
My lawyers gave me a personalized letter outlining what percentage of the fees was dedicated to the issue of SS. Now what? Tayken - any legal insight? THX
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Old 09-05-2012, 05:41 PM
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http://www.cra-arc.gc.ca/E/pub/tp/it...consolid-e.txt

"Paragraphs 17 and 18 have been revised to clarify that legal fees incurred in establishing the right to spousal support under the Divorce Act are NOT deductible. "

Hopefully CRA won't come after you for taxes on the previous year's invalid deduction.

You have paid your lawyer for an hour's work (guess) for nothing.
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Old 09-05-2012, 05:47 PM
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Thanks - I will try and change the percentage to indicate it was for CS... but the divorce order doesn't include CS...(we decided to qualify the kid as "independent", so no CS - despite many hours of discussing the CS issue over the year). Is this a lost cause?
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Old 09-05-2012, 06:20 PM
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Torontonian, have a look at the following CRA publication:
Support Payments
To establish whether the payments you pay or receive are support payments, see the following chart:
Are your payments considered support payments?
If you answer "yes" all the way down the chart, the payments you either pay or receive do qualify as support payments, therefore see:
Legal Fees – Payer
A payer cannot claim legal fees (at line 220, 221 or 232) incurred to:
· get a separation or divorce;
· establish, negotiate, or contest the amount of support payments; or
· establish custody or visitation rights to a child.
Legal Fees – Recipient
A recipient can deduct, on line 221 of their income tax and benefit return, legal fees paid to:
· collect late support payments;
· establish the amount of support payments from their current or former spouse or common law partner;
· establish the amount of support payments from the legal parent of their child (who is not their current or former spouse or common law partner) where the support is payable under the terms of a court order; or
· try to get an increase in support payments.
A recipient can also deduct, on line 232 of their income tax and benefit return, legal fees paid to try to make child support payments non taxable.
A recipient cannot claim legal fees incurred to:
· get a separation or divorce; or
· establish custody or visitation rights to a child.
Legal fees paid to collect a lump-sump payment which does not qualify as a support payment are not deductible (Lump-sum payments).
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Old 09-05-2012, 07:07 PM
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I get a letter every year from CRA. All you do is send in copies of your letter from your lawyer and hopefully you have itemized statement to go with it. Above post spells it out for you.
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Old 09-05-2012, 07:16 PM
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Thanks - this is post-submission of lawyer letters - as per my first post... I'll call them and see what the problem is... The only things worrying me is Paragraph 17. Legal costs incurred in establishing the right to spousal
support amounts, such as the costs of obtaining a divorce, a support order for
spousal support under the Divorce Act or a separation agreement, are not
deductible as these costs are on account of capital or are personal or living
expenses.
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Old 09-05-2012, 07:20 PM
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A very good issue for people to put forward to a lawyer they are just retaining when they start their separation/divorce process.
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Old 09-05-2012, 07:35 PM
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Quote:
Originally Posted by torontonian View Post
Hi - I just received a letter from CRA not accepting the legal fees deduction I claimed (for establishing SS). HELP?? My deduction was accepted last year...
My lawyers gave me a personalized letter outlining what percentage of the fees was dedicated to the issue of SS. Now what? Tayken - any legal insight? THX
http://www.ottawadivorce.com/forum/f...matters-12709/

It is for "CS" and not "SS" claims and only for the portion of determining the value and not custody and access decisions. There was also another thread if you search for it where I believe OrleansLawyer gave some guidance on the matter. (How much of of a split of a legal bill represents CS determination.)

I don't recall the thread off the top of my head.
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Old 09-05-2012, 08:34 PM
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The plot thickens .... this is from a May/June 2010 article
http://www.google.ca/url?sa=t&rct=j&...k-doTcfD5mdCDw

"Shortly after release of this document (IT-99R5, most recently modified Sept 6, 2002), CRA issued its Income Tax Technical News No. 24. This technical news release stated the following: “Following the decision in the case of Gallien v. the Queen (2001) 2 CTC 2676, 2000 DTC 2514 (TCC – informal procedure), CRA has reconsidered the above positions. As a result, we now consider legal costs incurred to obtain spousal support under the Divorce Act or under the applicable provincial legislation in a separation agreement to have been incurred to enforce a pre-existing right to support. Consequently, these costs are deductible pursuant to the comments in Paragraph 18 of interpretation bulletin IT-99R5. We also now accept that legal costs of seeking to obtain an increase in support or to make child support non-taxable under the Guidelines are also deductible. "

BTW: the article also addresses deductability of legal fees incurred by the CS PAYOR (which was not the OP's question)

Last edited by dinkyface; 09-05-2012 at 08:36 PM.
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Old 09-05-2012, 08:37 PM
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I think it is important, if you are talking about SS and not CS, to realize that you can claim your legal expenses for "defending or collecting" SS. I don't believe you can claim any portion that has to do with your divorce.

My ex takes me to court 2 x year to try to have SS squashed. I can therefore claim 100% of my legal fees.

Maybe provide us with a bit more information for clarification. Your lawyer should really know what you need for documentation, assuming you qualify to claim any legal fees.
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