Legal fees in line 22100 adding to carry-forwards

ColleenW · ‎March 30, 2023

I called Support but I wasn't able to get a straight answer. My client had legal fees for support payments in 2020 that I added to line 22100. It was deducted from her income, but is also showing up in the Carryfoward Summary under "Investment expenses claimed in previous years". In 2021, she had more legal fees, which was also deducted from her income that year, and also added to the previous carry-forward. Now for 2022, she has a large amount in her carry-forwards. I'm not sure if this is correct, a glitch in Profile?, but those carry-forwards are also showing up in her CRA account as net investment gain/loss. Can someone help clarify this?

janisbossenberry · ‎March 30, 2023

That figure (net investment expenses/gains) are the "CNIL" balance. The cumulative net investment loss (investment expenses over investment income) is a somewhat meaningless number these days. When everybody was eligible for a $100,000 per year capital gains deduction, a negative CNIL balance reduced the amount of the deduction you could claim. Now, it will only reduce a capital gains deduction which is claimed on Farm/fishing or some other capital gains deductions.

ColleenW · ‎March 31, 2023

I understand that, but why were legal fees in capital deductions in the first place? Line 22100 (legal fees for support payments) were populated here and I can't wrap my head around it.

janisbossenberry · ‎March 31, 2023

Anything claimed on line 22100 is recorded as an investment expense claimed in determining the CNIL balance (Cumulative Net Investment Loss). It doesn't mean that they are a capital expense. It does mean that should the individual claim a capital gains deduction in the future the amount will be reduced by the excess of legal fees (or other charges) claimed on line 22100 over investment income recorded. Legal fees for support payments must be claimed on line 22100 per CRA. Note that the bold "must" is CRA's bolding, not mine.

Fees relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, paid to you must be claimed on line 22100 of your return.

I