What is the test for deducting legal fees under Section 8(1)(b) of the Income Tax Act?

The underlying premise in the appellants’ argument that the legal fees in question are deductible is that paragraph 8(1)(b) of the Act permits a taxpayer, in computing his or her income from an office or employment, to deduct an amount for legal expenses incurred to defend a claim that such taxpayer was overpaid. Whether this paragraph would permit such a deduction is a question of law, for which the standard of review is correctness (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235). If, correctly interpreted, this provision does not permit such a deduction, then these appeals must be dismissed. The analysis in these reasons will focus on the interpretation of this provision.