15 May 1998 Ministerial Letter 9729598 - ENTERTAINMENT EXPENSE AT A GOLF COURSE

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: Deductibility of entertainment expenses at a golf course.

Position: Question of fact.

Reasons: Meals and beverages in conjunction with a game of golf are now deductible and not restricted by paragraph 18(1)(l).

May 15, 1998

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of October 24, 1997, on behalf of XXXXXXXXXX, concerning tax policies relating to the deductibility of entertainment expenses at a golf club.

The Income Tax Act restricts the deductibility of expenses in computing income from a business or property. 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. This provision states 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 the expenses were incurred in the ordinary course of a taxpayer's business of renting or leasing the property. It also states 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. Therefore, green fees or membership fees in a golf club are not deductible.

As for entertainment expenses at golf clubs, although paragraph 4 of Interpretation Bulletin IT-148R3, Recreational Properties and Club Dues, indicates that the cost of meals and beverages consumed at a golf club in conjunction with a game of golf is not deductible, the Department has recently reconsidered its interpretation of this provision.

I am pleased to inform you that the Department now considers that the restriction in subparagraph 18(1)(l) should be interpreted to include only recreational amenities provided by a golf club. Accordingly, this will not include the dining room, banquet halls, conference rooms, beverage rooms or lounges of a golf club. Thus

50 per cent of the cost of meals and beverages incurred at a golf club will be allowed as a deduction if incurred in the course of conducting business. As a result, the tax treatment of meals and beverages at a golf club will parallel that of meals and beverages consumed at a restaurant. In administering this new position, the Department will require that meal and beverage expenses incurred at a golf club be clearly itemized.

I trust that this information will clarify the Department’s position on this matter.

		Yours sincerely,

		Herb Dhaliwal, P.C., M.P.

J. Gibbons
957-2135
March 31, 1998