http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109214/index.do 
Jennings v. The Queen (April 17, 2015 – 2015 TCC 96, Woods J.).
Précis: Mr. and Mrs. Jennings appealed CRA’s disallowance of zoning expenses in connection with an Ottawa rental property they had owned jointly since 1987. They acquired the property as a three apartment rental property. In 1993 they received notice of a zoning violation, i.e., that the property could not contain more than one rental unit. They spent 17 years obtaining a zoning clearance. CRA claimed the expenses were capital in nature. The Tax Court held that the expenses were part of the normal management of the property and did not add anything to their use of the property. They were not capital expenses but current operating costs. The appeal was allowed with costs.
Decision: Mr. and Mrs. Jennings had a remarkable saga with the Ottawa zoning authorities:
[3] In 1987, the appellants purchased a residential property in Ottawa that had three rental units, including one in the basement. The property was purchased solely as a rental property. The appellants assumed the three tenancies.
[4] When purchasing the property, the appellants relied on a report on zoning from the City of Ottawa (the “City”) that seemed to suggest that there were no zoning violations.
[5] Six years later, in 1993, the appellants received a notice of violation of zoning by-laws from the City. The nature of the alleged violation was set out in a letter (Ex. R-1) as follows:
[…] the previous use of the property, as a legal non-conforming duplex, is also no longer permitted given that the building was converted to a three unit dwelling without prior approvals. The only means of legalizing the property as either a three unit converted dwelling or as a duplex would be to apply for a zoning amendment to request that these uses be permitted. […]
[6] To the appellants’ surprise, the City was taking the position that the property could only have one rental unit under existing laws. It appeared that the alleged violation occurred when the basement began to be rented, which was prior to the appellants’ ownership.
…
[10] The application was approved in 2010, and a zoning by-law was passed for use of the property as a duplex. According to the by-laws at the time, this enabled the property to also have a “secondary unit” which qualified the basement unit as well.
They sought to deduct $13,464.26 for application fees for a zoning change and $7,686.26 for related consulting fees in their 2010 taxation years. CRA denied the deduction reasoning that the expenses were on capital account.
The Tax Court agreed with the taxpayers:
[15] According to the evidence, which I accept, the appellants applied for the zoning amendment in 1993 and again in 2010 as the best way of dealing with the notice of zoning violation and in accordance with professional advice.
[16] From a practical perspective, the appellants were doing what was appropriate from time to time to ensure compliance with City by-laws. This was an activity that was part and parcel of the day-to-day management of the rental property. Zoning compliance was on ongoing matter from the time the property was acquired in 1987, until the zoning amendment was finally approved in 2010. I understand that the appellants tried to avoid having a new application in 2010, but the City required them to go through a new process.
[17] Throughout this whole period, the use of the property did not change.
[18] In my view, the expenditures should be viewed as ordinary expenditures incurred in connection with the day-to-day management of the rental property. It is true that the expenditures would likely have a long term benefit in the sense that the property was now clearly in compliance with existing by-laws. However, I do not think that this should tip the balance to result in the expenditures being non-deductible capital expenditures.
As a result the appeals were allowed with costs.