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Income tax — costs of mother's Notice of Objection deductible

My client C was a lady whose elderly mother had been reassessed for income tax. The CRA claimed that the mother's purchase and sale of a condo was business profit. I filed a Notice of Objection for the mother, showing that C's mother and father had intended to live in the condo indefinitely, and only sold it because of a change in circumstances. The CRA agreed and cancelled the assessment (see "Income tax — sale of condo was not a "flip" for profit").

C had paid the costs of her mother's objection, as the mother was retired and had little income. I had explained to C that, as long as C paid my fees, she would be able to deduct the cost on her own income tax return.

A year later, after C filed her return and included documentation of having paid my fees, she was reassessed by the CRA to deny the deduction. The CRA reviewer wrote that C could only claim expenses for contesting her own reassessment, not her mother's.

I filed a new Notice of Objection for C, explaining that the Income Tax Act provision allowing deduction of income tax objection or appeal costs does not require that the objection or appeal be of the person claiming the deduction. I also cited a case where the Tax Court had quoted with approval my published Notes on this point. I showed that C had an "interest" in her mother's objection (since she supported her mother financially and was a beneficiary of her mother's Will), and thus was entitled to the deduction.

The Appeals Officer who reviewed my objection quickly agreed, and allowed the deduction in full without even needing to speak to me.

(2014)