{"id":56026,"date":"2026-09-23T09:42:13","date_gmt":"2026-09-23T13:42:13","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=56026"},"modified":"2026-09-23T09:42:16","modified_gmt":"2026-09-23T13:42:16","slug":"who-can-deduct-legal-fees-for-a-tax-dispute-in-canada-lessons-from-kruivitsky-v-the-king","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/who-can-deduct-legal-fees-for-a-tax-dispute-in-canada-lessons-from-kruivitsky-v-the-king\/","title":{"rendered":"Who can deduct legal fees for a tax dispute in Canada? Lessons from Kruivitsky v. The King<\/i>"},"content":{"rendered":"\n

You paid a relative’s legal fees for their tax dispute, but can you claim the deduction?<\/p>\n\n\n\n

According to the Tax Court of Canada\u2019s recent decision in Kruivitsky v. The King<\/em><\/a>, <\/em>2026 TCC 141 [Kruivitsky<\/em>], the answer was no. Here is what the ruling could mean for those that fund someone else’s tax fight.<\/p>\n\n\n\n

The facts: What happened in Kruivitsky<\/em>?<\/h2>\n\n\n\n

The appellant, a chartered accountant, paid $6,211 in legal fees to support a tax appeal pursued by her niece’s husband. The appellant had no financial stake in the outcome of the dispute. The appeal was ultimately discontinued.<\/p>\n\n\n\n

The appellant subsequently claimed the legal fees as a deduction under subparagraph 60(o)(i) of the ITA. The Canada Revenue Agency denied the deduction, and she appealed to the Tax Court of Canada.<\/p>\n\n\n\n

Subparagraph 60(o)(i) \u2013 The deduction for tax dispute expenses<\/h2>\n\n\n\n

Subparagraph 60(o)(i) permits the deduction of amounts paid by a taxpayer for fees or expenses incurred in preparing, instituting, or prosecuting an objection or appeal in relation to an assessment of tax, interest, or penalties under the ITA or a similar provincial statute. On its face, the provision does not expressly state that the assessment must be the taxpayer\u2019s<\/em> own<\/em> assessment. In fact, the Tax Court of Canada (the \u201cCourt<\/strong>\u201d) noted that, under a plain reading of the provision, the appeal should succeed.[1]<\/a><\/p>\n\n\n\n

Applying the modern approach to statutory interpretation, the Court examined the text, context, and purpose of the provision. The Court cited the Supreme Court of Canada’s observation that seemingly clear statutory language may reveal ambiguities when read in its broader legislative context.[2]<\/a><\/p>\n\n\n\n

The Court placed particular emphasis on the relationship between subparagraph 60(o)(i) and paragraph 56(1)(l). Paragraph 56(1)(l) generally requires a taxpayer to include in income legal costs awarded in connection with an appeal relating to an assessment described in paragraph 60(o). The Court reasoned that permitting one taxpayer to deduct dispute-related expenses while a different taxpayer received and included a related costs award in income would create a mismatch that Parliament could not have intended.<\/p>\n\n\n\n

The legislative history of the provisions also informed the Court’s analysis. The Court found that Parliament enacted predecessor provisions to paragraphs 60(o) and 56(1)(l) as a coordinated scheme allowing taxpayers to deduct the costs of pursuing their own tax disputes while including related court-awarded costs in income. The Court found that there was never any intent to allow taxpayers to deduct the cost of disputing the assessments of other taxpayers.[3]<\/a><\/p>\n\n\n\n

Ultimately, the Court held while the wording of paragraph 60(o) may initially appear broad enough to permit a deduction by anyone who pays the expense, the provision must be interpreted in light of its broader statutory context. The Court noted that where Parliament intends to confer a deduction on someone other than the affected taxpayer, it generally does so expressly. The appeal was dismissed.<\/p>\n\n\n\n

Key takeaways<\/h2>\n\n\n\n