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Common Law Issues The law regarding common law relationships is different than in cases of divorce. Discuss the issues that affect unmarried couples here.

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Old 06-28-2010, 11:18 PM
Max22258 Max22258 is offline
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Default Revenue Canada

I have a problem with the way revenue canada has decided that only one person in a separation can claim for lawyer fee to establish support. As I remember we both used lawyer to establish the amount of support. I am not sure why the payor is to pay the legal fee. Botyh aim at the same thing but if you worked and made it in this place you are penalized. Is there a case where the payor took revenue canada to court and what was the outcome. I am curious to see why there is inequality in this??? Any lawsuit or lawyer dare to challenge this??
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Old 06-28-2010, 11:42 PM
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Line 232 - Legal fees

You can claim a deduction for legal fees on line 232 in any of the following situations:
  • you paid fees (including any related accounting fees) for advice or assistance in responding to us when we reviewed your income, deductions, or credits for a year or in objecting to or appealing an assessment or decision under the Income Tax Act, the Unemployment Insurance Act, the Employment Insurance Act, the Canada Pension Plan Act, or the Quebec Pension Plan;
  • you paid fees to collect (or establish a right to) a retiring allowance or pension benefit. However, you can only claim up to the amount of retiring allowance or pension income you received in the year, minus any part of these amounts transferred to a registered retirement savings plan or registered pension plan. You can carry forward, for up to seven years, legal fees that you cannot claim in the year;
  • you collected late support payments;
  • you established the amount of support payments from your current or former spouse or common-law partner;
  • you established the amount of support payments from the natural parent of your child (who is not your current or former spouse or common-law partner) where the support is payable under the terms of an order;
  • you sought to obtain an increase in support payments; and
  • you sought to make child support non-taxable.
You can also deduct on line 229 legal fees you paid to collect (or establish a right to) salary or wages. It is not necessary for you to be successful; however, the amount sought must be for salary or wages owed. You must reduce your claim by any amount awarded to you in respect of those fees or any reimbursement you received for your legal expenses.
Under proposed legislation you can deduct legal fees you paid to collect or establish a right to collect other amounts that must be included in employment income even if they are not directly paid by your employer. (These fees must be deducted on line 229.)
You have to reduce your claim by any award or reimbursements you received for these expenses. If you are awarded the cost of your deductible legal fees in a future year, you will have to include that amount in your income for that year.
For more information on other legal fees you may be able to deduct, get IT99R5, Legal and accounting fees.
You cannot claim legal costs you incurred to:
  • get a separation or divorce;
  • establish custody or visitation arrangements of a child;
Note
If you pay support, you cannot claim legal costs incurred to establish, negotiate, or contest the amount of support payments.
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Old 06-29-2010, 06:20 AM
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I know about how it is lay out right now, even thought I know I will be the payor this is not established until a court order.
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Old 06-29-2010, 08:06 AM
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It is not the Canada Revenue Agency that decides who gets the deduction, it is Parliament.
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Old 06-29-2010, 05:32 PM
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Here's a case where I'd agree that the payor should be able to deduct their legal fees...

Let's say that the parents have 50%-50% time with their child, so they use the table-offset method. Father earns more money, so he ends up being the one to pay the difference. HOWEVER, mother refuses to work, and so father incurred legal fees in order to get her income imputed. He wins, and it results in a decrease in the CS that he pays...

The father was in actuality fighting to ensure the child got their rightful support FROM THE MOTHER. In other words, the father's legal fees were spent establishing support for the child.

That could be a curious argument.
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Old 06-29-2010, 06:06 PM
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In my case, I had to take my ex to court as he didn't think he should have to pay child support, so a year and 1/2 later, still haven't seen anything.... even though we have a temp order but waiting for the papers to be served with the courts and FRO to contact me.
So, in my case, I think it's fair I get to deduct some of my legal fees
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Old 06-29-2010, 06:40 PM
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Yup, yours is the 'normal' case for which the 'tax deductions only for the recipient' rule makes perfect sense. But Max raises the question that there are other cases where the PAYOR should also be able to claim a deduction.
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Old 06-29-2010, 06:56 PM
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My point mostly is that both parties are trying to established the amount of support, so they are doing exactly the same thing as appropriate by the law. The fact that only one can deduct the lawyer fees is discreminatory. As they both maybe earning the same amount of money with sometimes a difference that is not too great. even if their salary was different by $20,000 you know that one will be able to claim but not the iother one, this in itself in a nasty battle may result and may result in an appreciatable difference.
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Old 06-29-2010, 08:47 PM
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The Income Tax Act requires that legal fees be paid to establish or enforce a right to support. I think legal fees incurred to establish an offset right are arguably deductible as technically both parties are receiving support. Maybe they already are. I have to confess I don't know.

I'll see you in the library Max to research the case for presentation all the way to the Supreme Court.
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Old 06-29-2010, 09:25 PM
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Ah yes I would not be the one to take this to the supreme court, this is an expensive venture..
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