14 April 2009 External T.I. 2009-0305561E5 - Deductibility of Travel Expenses - Business Income

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.

Principal Issues: Deductibility of travel expenses - computation of income from a business.

Position: General comments only.

Reasons: Question of fact as to whether such expenses were incurred in a business activity or a hobby.

XXXXXXXXXX 							2009-030556
								Michael Cooke, CA
April 14, 2009

Dear XXXXXXXXXX

Re: Deduction of Travel Expenses

We are writing in response to your letter dated January 3, 2009, wherein you inquired about the deductibility of certain travel expenses as described in your letter.

Since the situation outlined in your letter relates to a factual one involving a specific taxpayer you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the Canada Revenue Agency's website as well as copies of any publications mentioned herein. While determining whether the travel expenses incurred by you are deductible remains a question of fact, we are prepared to offer the following general comments.

Under subsection 9(1) of the Income Tax Act (the "Act"), a taxpayer's income from a business or property is the "profit" therefrom for the year, subject to the particular rules set out in Part I of the Act. For instance, paragraph 18(1)(a) of the Act provides that no outlay or expense is deductible in computing the income of a taxpayer from a business or property, unless it was made or incurred for the purpose of gaining or producing income. Further, paragraph 18(1)(h) of the Act denies the deduction of personal or living expenses incurred by a taxpayer, other than travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business. The deduction of any outlay or expense that was made or incurred for the purpose of gaining or producing income from a business or property is also subject to the general rule in section 67 of the Act that such outlays or expenses be reasonable in the circumstances. Please refer to the Business and Professional Income Guide (T4002) for additional information.

In these types of circumstances it is often necessary to determine whether a taxpayer is, in fact, carrying on a business or merely pursuing a personal endeavour. Where a personal or hobby element exists, the activity will be considered a source of income from a business or property only if the activity is undertaken in a sufficiently commercial manner. Assuming a taxpayer does have a source of income from a business, reasonable travel expenses incurred by the taxpayer in the course of carrying on that business would be deductible.

We trust that these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch