Legal fees for severance

OK, I have a client who incurred legal fees during 2019-20 to fight for a retiring allowance. The allowance was eventually paid out in 2020, so we deducted the legal fees against it on line 23200 that year. Upon review CRA has allowed only the portion actually paid in 2020. I called about it, spoke to a couple of agents - they sent it farther up the food chain and today called me back to tell me that the disallowed portion (paid in 2019) should be deducted against her regular income in that year instead of carrying it forward to be deducted against the retiring allowance.

I have not been able to find anything indicating the rules for this have changed (have they??) so my question is: do I actually try to adjust her 2019 return like they suggested or file an objection? I cannot imagine the 19 adjustment would be allowed unless it happens to be the same agents reviewing…

I experienced the same thing, there were legal fees in multiple years. What a pain.

Did you manage to get it resolved?

I am thinking, this must had something to do the accrual of the legal fees in the perspective of the lawyer, not with the individual. The lawyer should had included the portion of legal fees in 2019, and for matching purpose, the deduction would only be allowed in 2019