25 July 2002 External T.I. 2002-0147085 - EMPLOYEE EXPENSES-DUES

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: A number of medical doctors have established a fund at a hospital to which they contribute annual dues of $XXXXXXXXXX each. The fund is used for food and beverages at meetings, gift baskets for the bereavement of patients or former patients, and retirement gifts. We have been asked whether the medical doctors, who are employees, can deduct the contributions.

Position: Our general position is that the contributions are not deductible.

Reasons: There is no provision within section 8 of the Income Tax Act that allows such a deduction and subsection 8(2) of the Act contains a general limitation denying a deduction from office or employment income except as permitted by section 8 of the Act.

XXXXXXXXXX 2002-014708
M. Eisner, CA
July 25, 2002

Dear XXXXXXXXXX:

Re: Employee Expenses

This is in reply to your letter of June 13, 2002 and our discussion on July 16, 2002 (XXXXXXXXXX/Eisner), concerning the above noted subject.

The circumstances of your situation relate to a number of medical doctors who have established a fund (the "Fund") at a hospital to which they contribute annual dues of $XXXXXXXXXX each (the "contributions"). You have indicated that the Fund's activities consist in providing food and beverages at meetings, gift baskets for the bereavement of patients or former patients, and retirement gifts.

You have asked us whether the medical doctors who are employees can deduct such contributions. In connection with your concern, you have indicated that medical doctors who are employees should be entitled to deduct such contributions as you believe that self-employed medical doctors are entitled to deduct them.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, dated May 17, 2002. Where the particular transactions are completed (as is the case in your situation), the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments, which are of a general nature.

We assume the employees in the situation submitted are not employed in connection with the selling of property or negotiating of contracts for their employer. Furthermore, the Fund is not a trade union or an association described in paragraph 8(1)(i) of the Income Tax Act (the "Act").

Section 8 of the Act sets out a number of deductions that relate to employees. However, subsection 8(2) of the Act contains a general limitation denying the deduction of employment expenses in computing a taxpayer's income from an office or employment except as specifically permitted by section 8 of the Act. As there is no provision in section 8 of the Act that permits the deduction of the contributions described above, it is our opinion they would not be allowed as a deduction in computing income from an office or employment.

With respect to the concern you raised regarding self-employed persons including medical doctors, we would note that in computing the income of a taxpayer from a business, expenses of a current nature are only deductible pursuant to paragraph 18(1)(a) of the Act to the extent that they were made or incurred for the purpose of gaining or producing income from such a business. In addition, several provisions of the Act may restrict the deduction of expenses incurred by self-employed persons. In order to determine whether any of these provisions apply in a particular situation, it would be necessary to review all the relevant facts and documentation.

Should you need further assistance, you may contact your local tax services office.

Yours truly,

for Director
Business and Partnerships Division
Income Tax Rulings
Policy and Legislation Branch

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