CCPC incurred legal fees for Trademarks in progress.
Article from Oyen Wiggs Green & Mutala LLP:
cost associated with registering a trademark (including legal fees) are generally considered business expenses
ITA 20(1)(cc)
My interpretation - legal fees associated to the Trademarks are expensed - do others see this differently?
Really doesn’t matter how “others” see it. It only matters to the person who will be trying to prove it to CRA (if they question it). CRA will direct such questions to the taxpayer, but the taxpayer can hire you (or a lawyer, etc) to help them respond. Then it depends on how you present it, and what supporting documentation you can give them.
Another way to look at it: the taxpayer has incurred this legal expense - if you dig through the ITA you might find a dozen or more provisions where/how you could claim this as a legitimate deduction, depending how you frame it.
So, you could get a hundred of us on this forum to say, “Yes, we agree - looks like 20(1)(cc) could work.” But, that won’t help you if you can’t prove it to CRA - they don’t care how many other people agree with you.
Can you expand if possible? Like how a real-life scenario would play out.
My dealings with the CRA have been providing documents proving expenses mostly - they say thank you and everyone walks away happy.
I’ve never battled it out with the CRA about the tax treatment of a transaction.
I think you answered your own question - CRA sends the taxpayer a letter asking for various documentation, the taxpayer asks you how to respond to it, you read the letter from CRA and tell the taxpayer what documents they need to provide, the taxpayer brings you those documents, you photocopy all that stuff (or scan it in, if responding electronically), write a cover letter, attach the supporting documents, and mail it to CRA (or submit electronically).
If CRA doesn’t like the response, or the supporting documents, they will contact you or your client - maybe via phone. If they still can’t get the “proof” they are looking for, they will deny the expense, or reclassify the income, or whatever is relevant to that particular situation. Then they send the taxpayer a NOA or whatever. Then, if the taxpayer doesn’t agree with CRA, you or your client file a NOO (which is quite easy to do now via RAC - just click “File a formal dispute”, choose the item you are disputing, and type your explanation.
After that, if it doesn’t get resolved how your client wants, he/she can take CRA to court - I don’t know exactly how that works - if I ever went that far, I’d hire a tax lawyer and get them to handle the case.
If the legal fees are a direct cost of registering or acquiring the trademark, capitalize them and amortize accordingly. Same treatment in the US
Disregard your reference to Section 20, it only applies mostly as an override to Section 18 on account of a deduction for eligible capex
@Nezzer - helpful replies - as usual - thank you!
Can you expand a little further, if possible?
I have following:
Journal Entry
Intangible Asset - Trademark $xxx.xx
Cash $xxx.xx
Tax Treatment
Note: Multiple payments made to lawyer in fiscal period.
I plan on recording Current Year Addition - Transaction date as date of final payment date to lawyer.
Thoughts?
