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- Title
RECONSIDERING THE INCOME TAX TREATMENT OF INVESTIGATION FEES.
- Authors
HILDEBRANDT, PAUL
- Abstract
This paper seeks to establish a uniform approach to determining whether expenditures incurred to investigate the feasibility and merits of undertaking a capital transaction are, for Canadian income tax purposes, made on current or capital account. The jurisprudence is divided as to when, if ever, investigation fees are current expenditures. I argue that, to the extent it bases the tax classification of investigation fees on factors other than the nature of the expenditures, the existing jurisprudence should not be followed. I argue for the adoption of an approach that classifies investigation fees as current expenditures unless they directly provide the taxpayer with an enduring benefit. I analyze the tax issues applicable to investigation fees through the lens of the most recent decision on the topic: Rio Tinto Alcan Inc v R. I begin by identifying why Rio Tinto does not provide a satisfactory solution to the issue of investigation fee classification. I then reason from first principles to explain why investigation fees, other than those that directly provide an enduring benefit, are current expenditures. I conclude by discussing why the cases that have considered investigation fees to be capital expenditures should no longer be followed.
- Subjects
INCOME tax laws; RIO Tinto Alcan Inc.; CAPITAL accounting laws; TAXPAYER compliance; INVESTIGATIONS
- Publication
University of Toronto Faculty of Law Review, 2021, Vol 79, Issue 2, p207
- ISSN
0381-1638
- Publication type
Article