2015-0614151E5 Deductibility of Actuarial Fees

Principal Issues: Whether actuarial fees incurred in connection with the division of pension benefits on marriage or common-law partnership breakdown are deductible in computing income?

Position: No.

Reasons: The actuarial fees were incurred on account of capital and paragraph 18(1)(b) would apply to deny the deduction.

Author: Podor, Karina
Section: 18(1)(a), 18(1)(b), 18(1)(h), 60(o.1)

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                                                                                                                                                                                 2015-061415
                                                                                                                                                                                 K. Podor
February 29, 2016

Dear XXXXXXXXXX:

Re:    Deductibility of Actuarial Fees

We are responding to your correspondence dated October 20, 2015 concerning the deductibility of actuarial fees incurred in connection with the division of pension benefits on marriage breakdown.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”) and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, “Advance Income Tax Rulings and Technical Interpretations”. 

In our view, actuarial fees incurred in this situation would not be deductible.

Expenses (such as legal or actuarial fees) incurred in connection with the division or settlement of a right to pension benefits arising out of, or on a breakdown of, a marriage or common-law partnership are considered to be on account of capital.  Paragraph 18(1)(b) of the Act prohibits the deduction of a capital outlay in computing income, except as expressly permitted by Part I of the Act.  Although paragraph 60(o.1) of the Act permits, in certain circumstances, a deduction for legal expenses incurred to establish a right to pension benefits, expenses relating to a division of property on the breakdown of a marriage or common-law partnership are ineligible under this provision.

There is no other provision that permits a deduction for such expenses.

We trust our comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CPA, CA
Manager
Deferred Income Plans I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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