In a recent technical interpretation (2012-0434071E5), the CRA confirmed that legal fees incurred to prepare a voluntary disclosure application are not deductible under paragraph 60(o) of the Income Tax Act. Paragraph 60(o) permits the deduction of “amounts paid by the taxpayer in the year in respect of fees or expenses incurred in preparing, instituting or prosecuting an objection to, or an appeal in relation to” an assessment under the Act (among other things). It appears that the CRA takes the view that a voluntary disclosure is not an objection or appeal. The CRA technical interpretation, however, states that, if the CRA proposes to revise income or tax payable, then fees paid to make representations against the proposal would be deductible under paragraph 60(o).
