25 September 1989 Income Tax Severed Letter 74267 F - Investment 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.

24(1)

This is in reply to your memorandum of August 21, 1989 concerning the deductibility of membership fee discounts in calculating property income for purposes of subsection 149(5) of the Act.

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(3)    24(1)

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(5)

Our Comments

Subparagraph 149(5)(e)(i) of the Act requires the Club to calculate its income on the assumption it had only property income. The discounts respecting the prepaid membership fees are not directly related to the earning of the interest income and cannot be considered expenditures or outlays incurred to earn the interest income. Consequently, the club cannot deduct the discounts in computing its interest income for purposes of subsection 149(5) of the Act.  The discounts would in our view be deductible in computing the clubs other income.

As the Audit Applications Division of Head Office is concerned with the possible assessments of any and all non-profit organizations, we have forwarded to them a copy of this reply for their information. We understand that they will be in contact with you in the near future concerning this file and thus you may wish to await their comments before entering into any further discussions with the taxpayer or its representatives.

We trust this will be of assistance.

for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental  Affairs Branch