Cases
The Queen v. Young, 89 DTC 5234 (FCA)
Subscription expenses for five investment publications which were used as guides in deciding whether to buy stocks on the basis of their expected yields were used by the taxpayer for deciding on the purchase or sale of stock investments, managing such investments and generally in the administration of an expanding portfolio of such capital assets, rather than for the purpose of earning income from property. They were non-deductible capital expenditures.
Firestone v. The Queen, 87 DTC 5237, [1987] 2 CTC 1 (FCA), rev'g 86 DTC 6405, [1986] 2 CTC 251 (FCTD)
Expenditures incurred by the taxpayer in assembling a conglomerate of four companies were non-deductible: "an expenditure for the acquisition or creation of a business structure is on capital account." It was held that costs of investigating 50 other opportunities that did not lead to acquisitions should be treated on the same footing since they were incurred as part of the taxpayer's plan of assembly of business assets.
Expenditures for the supervision of the companies, once acquired, were deductible. It was noted, however, that "if the only possible profit from the appellant's supervision expenses were to have been an accretion in the market value of the appellant's shares of capital stock in the operating companies, then his failure to charge management fees to those companies might have been fatal".
See Also
Wickham Estate v. The Queen, 2015 DTC 10125 [at 102], 2014 TCC 352
Investment management fees paid by the taxpayer were fully deductible under s. 20(1)(bb) except for the portion thereof that was denied under s. 18(1)(u)). Before so concluding, Paris J stated (at para. 19) that "since the management services provided by Mr. Sanders related to capital assets held by Ms. Wickham, the fees would be non-deductible capital expenditures unless otherwise provided." See detailed summary under s. 20(1)(bb).
Revenue and Customs Commissioner v. Peter Clay Discretionary Trust, [2009] 2 WLR 1353 (CA)
Fees of investment advisors incurred by a discretionary trust were on capital account because they were incurred after the trustees had resolved to accumulate income. However, the portion of fees of the trustees that related to addressing matters which were explicitly for the benefit of income beneficiaries would have been chargeable to income.
Wilson v. MNR, 80 DTC 1379 (T.R.B.)
The taxpayer, who derived 1/3 of his income or approximately $20,000 per annum, from a portfolio of stocks and bonds was able to deduct the $1,020 cost of subscribing to six investment advisory letters.
Administrative Policy
23 March 2007 T.I. 2006-020707 -
A performance fee break (based on percentage increases in the fair market value of the portfolio that was being managed) might be deductible, depending on the circumstances, under s. 9 in computing income from a business or property, or be deductible under s. 20(1)(bb).
5 March 2003 T.I. 2002-015140
Various fees paid by a taxable Canadian corporation with respect to its proposed acquisition of another taxable Canadian corporation would be considered to be on capital account on the basis of the principle that "in the case of an unsuccessful take-over, these costs will generally be accorded the same treatment, as either income or capital, which they would have been accorded had the acquisition attempt been successful."
10 June 1998 Memorandum 980870
Travel expenses incurred by employees of a corporation whose sole activity was the investment of its capital in shares and other instruments would not be deductible in light of the Firestone case.