Retired, or soon-to-be retired, lawyers will be happy to know that Hamilton’s own Justice Bocock has held that fees paid for file storage by a retired lawyer are deductible even though the lawyer is no longer earning business income. Sounds reasonable. The Court, however, felt it necessary to add the following:
[13] The Respondent did not raise the issue of reasonableness in her reply. The Court notes that such expenses are presently so, being only 3 years after cessation of providing “active” legal services. However, given the advances in technology, the reduction of Ms. Tournier’s annual storage costs is possible through digitization and planned destruction. An argument of unreasonableness may be available should those best practices not be undertaken in future, but presently this is not the case.
These comments are obiter, of course, but they are somewhat troubling. They suggest the professional must digitize files to reduce storage fees. Digitization, however, can be expensive. Will the storage savings be offset by the costs of digitization? Will the CRA accept that digitization, which will likely be a large one-time cost, is a deductible expense? Is the CRA entitled to second-guess the business judgment of the professional and demand digitization as a way of ameliorating storage fees? What happens if the professional believes that the original files are the best means for meeting his or her obligations to former clients and the run-off insurer?
Tournier v R, 2018 TCC 229 (informal procedure)
