Legal Fees (Assorted Topics)

I have a question for my fellow members here. This question is ( did someone here do a calculation with respect to adding the Legal fees on line 232, and resulted in a partial deduction for their fees, after completing their return to see what they will owe, before having their tax completed by and accountant ? )

Thanks Nav. It still really sickens me that we got so boned on this deal. Back to "Death and Taxes" mentality I guess.
Sickly Sapper

OK I am incorrect here. Just wishful thinking I guess. Went right to my "package" from MC and it states deductable on line 232 of your T1 income tax return for 2013. Shtt. ...just wanted to not have to pay more. Thanks for the intelligent banter. Great work Trooper and Carver too. Thanks.
Sap

I believe Trooper is right in LTD is classified as a wage loss replacement benefit thus the T4A for that. Actually it is the Chief of Defence staff who s the holder of our ltd policy and Manulfe is the administrator .

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 for those fees or any reimbursement you received for your legal expenses.

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.

You must 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, include that amount in your income for that year.

(right to salary or wages, employment income.) I believe that our LTD does not qualify as salary or wages or employment , it is defined as Long term disability therefore would in my mind not qualify for line 229.

That is just me, I have been proven wrong before, in this case I do hope that I am wrong.

Line 232 - Legal fees
You can deduct your expenses in any of the following situations:

You paid fees (including any related accounting fees) for advice or assistance to respond to us when we reviewed your income, deductions, or credits for a year or to object to or appeal an assessment or decision under the Income Tax Act, the Unemployment Insurance Act, the Employment Insurance Act, the Canada Pension Plan, 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 you cannot claim in the year.

You incurred certain fees to try to make child support payments non-taxable. Fees relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child paid to you must be deducted on line 221. You cannot claim legal fees you paid to get a separation or divorce or to establish custody of or visitation arrangements for a child. For more information, see Guide P102, Support Payments.


Line 229 - Other employment expenses
You can deduct certain expenses (including any GST/HST) you paid to earn employment income. You can do this only if your employment contract required you to pay the expenses and you did not receive an allowance for them, or the allowance you received is included in your income.

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.

You must 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, include that amount in your income for that year..

>>>>>If i interpret this correctly lets say you claim 30k for legal fees but are awarded 200k  then the 200k must be deducted from the legal fee claim leaving you zippo for a legal fee claim, please inform interpreted incorrectly.<<<<

Carver...re-read the act on line 229 versus line 232. We are not fighting for a pension benefit or retirement allowance here. Wages that were incorrectly withheld for years...and taxed when we received them. Sounds like an employment expense to me.
Sap

Line 232 is for retirement allowance or pension benefits...ours is an employment expense I believe, as we are not pensioned from Manulife?? We are infact employees paid a wage and deducted taxes?! I think the prized pig here is line 229...over to you Trooper..
Sap

trooper wrote:After re reading info for Line 232 and Line 229, I understand it to read that our Legal fees for deduction would go on Line 232.

Therefore at a 15% deductible rate.

After re reading info for Line 232 and Line 229, I understand it to read that our Legal fees for deduction would go on Line 232.

Went through the deductions...line 229 Other Employment Expenses (legal fees paid) comes directly off your total income on line 150, reducing your taxable income dollar for dollar. This should not be confused with the legal fee deduction for obtaining a retirement allowance or pension (based on a percentage paid). Manulife is our employer and we paid to have our income returned. Taxable Income I might add.
Sap

This is all I could find on CRA website:
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 for those fees or any reimbursement you received for your legal expenses.
I guess one needs to complete schedules to know what deduction to claim. Hopefully more that the 15% stated.
Sap

Thanks for the info Carver, Nav, Trooper et el. I am doing a dummy return with my BMO person now to see what I need to put away. Funny that I haven't had taxable income for a couple decades, and now I need an RRSP. HEADS JUST A SPINNIN....and I did read that legal fees paid to end collective bargaining or wage mediation is fully tax deductable in Canada...just need to find that link now. Thanks all.
Sap

Thanks LTD4me. Can anyone confirm that although the legal fees and disbursements are claimable however it is only a portion (15% of those fees) that is actually what is deducted from our taxable income (settlement). Any updates on the letter of comfort from the defendant as yet?

Another note:    as indicated in the Class Counsel's brief on "Plaintiff's reply to class member concerns and the defendant's submissions on fees" page 7 para 24     "Further, Class Counsel also took steeps to seek some comfort that Class Members would be able to claim a deduction for the legal fees paid under s. 8(1)(b) of the Income Tax Act
Deductions allowed

8. (1) In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto
(a) [Repealed, 2001, c. 17, s. 3(1)]
Marginal note:Legal expenses of employee

(b) amounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect, or to establish a right to, an amount owed to the taxpayer that, if received by the taxpayer, would be required by this subdivision to be included in computing the taxpayer’s income;