I understand that in 2022 the CRA revised its interpretation of paragraph 20(1)(bb). While the legislation itself did not change, it appears the CRA’s administrative position regarding the deductibility of certain investment-related fees was updated.
My client incurs two distinct types of fees:
An “advisory” fee related to the provision of investment advice; and
A “portfolio management fee,” relating to the management of the investment portfolio.
Combined, these fees exceed $5,000 annually. It appears that prior tax preparers did not claim these amounts as deductions on line 22100.
Based on my understanding, such fees may be deductible provided that:
They are incurred for the purpose of receiving investment advice or for the management of an investment portfolio;
They relate solely to taxable (non-registered) investments; and
They do not constitute commissions or similar transaction-based charges.
Given that the client has not claimed these deductions in the past five years, I want to ensure that any adjustments or refilling’s are fully compliant with CRA requirements. My concern is to avoid submitting amended returns that may later be denied due to a differing CRA interpretation.
I would appreciate input as to whether this interpretation is correct.
My client was questioning why I didn’t put in the fees/interest etc… on his tax return as he was advised by his advisor that those would be tax deductible, I asked him what incomes did he make for the tax year from those services, there was nothing, was told by his advisor those gain would not be seen until sold in the future. Then I asked him to get confirmation from his advisor who and what basis they had to support, and then his advisor said, well, most people claim it, …..
Yes they are deductible - report on S4. I’ve never had CRA question that deduction, but I don’t recall doing a T1-ADJ to include them (clients generally give them to us with the related slips, so we have it in the original return). Not sure what changed in 2022 but I’ve been reporting investment fees on S4 for 30+ years. Am I missing some nuance here?
I wish mine was that simple, I went over my reasoning with my client and he brought it to his investment company, so we had couple meetings, so I was like, fine, don’t show it on the portfolio statement as management fee, give me a formal invoice, showing total management fee paid and said it’s for non registered investments, eligible investments, that’s income prodocuding and income tax purposes, after few days, the investment company came back, said, agreed, it’s not tax deductible.