In this case, there were two active shareholders who both passed into estate blockages concluded at the same time. This process has also resulted in significant costs for updating and revamping the shareholder contract. The tax court also found that the shareholders` pact was of great importance to the protection of the company in its dealings with shareholders and found that the costs incurred for the redesign of the shareholder contract were not personal expenses of the shareholders. It is interesting to note that the tax court authorized the company, since the shareholder contract was rewritten and reformulated, to also deduct the total cost of legal fees as current expenses, as opposed to capital charges, and compared the redesign of the shareholder contract to the maintenance and repair of an asset of the company. While each proceeding will depend on its own facts, this decision of the Tax Court in Truck Base Corporation/The Queen for the assertion that the company has its own legitimate interest and the expenses it represents with respect to those interests will be deductible from the company, even if the shareholders have a strong personal interest in completing the termination of the estate or in drafting a shareholder contract, as in this case. However, if the expenses do benefit only the owner/manager and the shareholder (in this case the expenses associated with the creation of the family trust), the legal and accounting fees are a benefit to shareholders when paid by the corporation. No, you can`t. Only certain types of legal fees are tax deductible and, in your case, legal fees are capital and therefore not deductible. Unit trusts are formed according to a number of rules called acts of trust. This defines the rules of trust, but in some cases it will not be enough to meet your needs. As a result, additional provisions may be covered by an agreement between unitholders. You should contact a lawyer to reach such an agreement. The tax court has agreed with the taxpayer that these restructuring costs are duly deducted by the company as legitimate business expenses.
Also, remember that if you are a small business unit (revenues less than $10 million), all expenses generated by professional advice on shareholder or partnership agreements from your accountant or solicitor are tax deductible. While not covered in this case, legal and accounting expenses resulting from a sale of shares by the owner or manager will also be taxable benefits when paid by the company, but transactions involving the sale of shares will also result in significant social work in the transaction. In the case of a fair distribution of these royalties between the company and the shareholder, the amounts allocated to the company should be deducted from the company without benefiting from taxable benefits to shareholders.