Précis: Mr. Horn through various corporations carried on a business trying to develop First Nations Gaming in Alberta. He obtained financing for his business from two American corporations. As part of the financing he pledged the shares of his main operating company, New Buffalo Gaming Inc. (“New Buffalo”). He sued in Arizona when the American corporations defaulted on the financing. Similarly, he also incurred legal fees in an Alberta action in which the American corporations attempted to enforce their security interest in the New Buffalo shares. He claimed a deduction for the US and Canadian legal fees paid in 2004, 2005 and 2006 as well as a loss carryforward in 2009 arising out of those legal fees. The Tax Court held that neither set of legal fees were not deductible insofar as they were incurred to protect a capital asset, i.e., the New Buffalo shares, which were pledged as part of the financing arrangements. Thus the appeal was dismissed, with costs.
Horn v. R. – TCC: Legal fees not deductible, paid to protect capital assetsPlus >