Legal Fees (Assorted Topics)

So I will attempt to pass on and example given to me by the CRA.

"2013 TAX RETURN EXAMPLE WHICH INCLUDES RRSP'S AND LEGAL FEES"

Total income = $300000 Line 260
RRSP contribution = $5000. Line 208
Legal fees = $20000 Line 232
You minus the rrsp and the Legal fees from your total income = $275000 which is your taxable income.
Now you take the taxable income and times it by the federal tax.
Now you take the taxable income and times it by the provincial tax.
Then you add the two amounts both federal and provincial which becomes your total payable tax Line 435.
This is what you should have paid based on your total income.
Then you take the amount of taxes withheld Line 437.
Then you take the amount you should have paid, minus the amount withheld, this will show you what you owe.

This is just and example, keep in mind there are other things like the DTC ect.... that would also come into play.

The reason I have provided this example is to clarify if the Legal fees are deducted dollar for dollar.
This is what I came out with, yes the Legal fees are deducted dollar for dollar, however at the final phase of the return calculations, the Legal fees do end up as a percentage deduction of your return. This could be why individuals have been stating the Legal fees only provide you with a percent deduction.

I do hope this example is correct, it came directly from the CRA, I also hope this shows some clarification on how the Legal fees are deducted.

If someone finds errors, please feel free to correct it, as you would be doing me a favor by doing so, as I am always willing to learn.

Thats how I read it too. My 5 years of grade 8 edumacation make it pretty easy to understand. Now get CRA to spin that wheel ...

ltd they are not referring to your retro but any award for legal fees since we did not get anything for legal fees their would be no deduction for it.

propat

ya in my opinion from reading the act and regulations it can go on either line as by definitions outlined in these documents it can be considered as either one. yup the income one seems a little merky ( witch it is ) but bottom line if it was a fully private plan then it is not deductible but if the money is coming from your former employer then it is. yup sisip is cutting the cheques for sure but we all know who is paying the bills.

just my opinion

propat

LINE 229 would be pointless to use as our legal fees (claim) are lower than our received income (award or reimbursements),and according to the cra def of line 229
"You must reduce your claim by any award or reimbursements you received for these expenses"

Teen, I agree, I may also send a request to allow for this deduction, something that I am thinking about.

I was just throwing a curveball to Navrat. I too have talked to CRA and I was told it goes on line 232 and it will be a full deduction because it's legal fees to get back money that was owed to us from an insurance company.

This is sorta going round and round. About all we can do at this point is just put the legal fee amount on 232, add the t1198 and the lawyers bill in the envelope and see what happens.

abetterway, I understand where your coming from, however I have been speaking with specialist from the CRA with respect to Legal fees, I was told that if you did not fall under the category to claim your Legal as definition, they sometimes grant this for special circumstances. In other words they can make changes for and individual, and or individuals to allow for the deduction for Legal fees if so requested.

Yes Carver sorry, I was told that we could not claim our fees on Line 229.

trooper wrote:Teen, I asked them about line 229, and was told that we could put our fees there, because it's not salary or wages that we have paid our fees for.

They told me if we choose to claim the fees, we must use Line 232.

Did you mean we could not use line 229 trooper?

Teen, I asked them about line 229, and was told that we could put our fees there, because it's not salary or wages that we have paid our fees for.

They told me if we choose to claim the fees, we must use Line 232.

Teen Line 229 says legal fees you paid to collect  for salary or wages. Does that work in our cases? LTD is neither wages nor salary I query.

Here Nav then try and put it on this line

You can deduct on line 229 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.

Got the info from this link

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/232/lgl-eng.html

exactly Nav. That's what I was viewing as well.

If you put the legal fees on line 232 , it's a non refundable tax credit, and only 15 percent comes off