Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether membership fees in a golf club are deductible.
Position:
No.
Reasons:
paragraph 18(1)(l)
972061
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
December 2, 1997
This is in reply to your letter of July 29, 1997, concerning the deductibility of membership fees in a golf club.
The situation described in your letter involves a taxpayer who is in the business of selling golf clubs and golf balls. To demonstrate his product he takes clients out on the golf course. In your view the taxpayer should be entitled to deduct a portion of his membership fees in the golf club. In support of your view, you make reference to the Department's response at the 1984 annual conference of the Canadian Tax Foundation.
The Income Tax Act (the "Act") provides several restrictions with respect to the deductibility of expenses in computing income from a business. One of those restrictions is found in paragraph 18(1)(l) which concerns the deductibility of expenses in respect of certain recreational properties and club dues. Subparagraph 18(1)(l)(i) specifically provides that, in computing income from a business, a taxpayer cannot deduct outlays or expenses for the use or maintenance of a property that is a yacht, camp, lodge or golf course or facility, unless they were incurred in the ordinary course of a taxpayer's business of providing the property for hire or reward. In addition, subparagraph 18(1)(l)(ii) provides that membership fees or dues in any club cannot be deducted if the main purpose of the club is to provide its members with dining, recreational, or sporting facilities.
As regards the Department's response at the 1984 annual conference of the Canadian Tax Foundation, it should be noted that our response was restricted to the type of property described in subparagraph 18(1)(l)(i) of the Act. Therefore, it does not apply to membership fees or dues which are referred to in subparagraph 18(1)(l)(ii) of the Act. Since subparagraph 18(1)(l)(ii) of the Act applies without exception, in our view, membership fees in a golf club are not deductible, even if the golf course is used for business purposes.
We trust that these comments will be of assistance.
Yours truly,
C. Chouinard
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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