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.
XXXXXXXXXX
August 2, 1994
Dear XXXXXXXXXX:
It was a pleasure to meet with you and XXXXXXXXXX. As agreed during our meeting, I am writing to set out the Department's position regarding the application of the provision of the Income Tax Act that restricts the deductibility of expenses incurred for the use of a lodge.
We were asked to comment on this issue at the annual conference of the Canadian Tax Foundation in Montreal on December 1, 1993. At that time, the following question was posed.
"What is the Department's current assessing practice in situations similar to Sie Mac Pipeline Contractors Ltd. (93 DTC 5158)? How far will the Department go in disallowing deductions for the use of a camp, lodge, yacht or golf course? Will a meal in the dining room of a golf club be non-deductible? Will green fees be non-deductible? In general, will a payment for short-term use of such a facility be restricted? If so, this seems inequitable. If a taxpayer holds a seminar in a hotel conference room, the room rental will be fully deductible. If the same seminar is held in a conference room at a fishing lodge, it will be totally non-deductible."
The Department gave the following response to the question.
"At the 1984 Conference, the Department announced that, where property of a type described in subparagraph 18(1)(l)(i) of the Act is used for business purposes, which purposes do not include the entertainment or recreation of clients, suppliers, shareholders or employees, the Department will not consider that the related expenses, provided they are reasonable, fall within the provisions of paragraph 18(1)(l).
The Department is reviewing this position in light of Sie Mac. Until this review is complete, the Department will follow the 1984 position."
I am pleased to advise you that the review has been completed and the 1984 position as set out above will continue to be followed by the Department. This position will allow the deduction of expenses for genuine business meetings held in resort hotels. However, no deduction is available in situations like the Sie Mac Pipelines Contractors Ltd. case; that is, where there may be some business meetings involved however the main activity is recreation.
The Department considers the word "lodge" in paragraph 18(1)(l) of the Act to mean an inn or resort hotel, particularly one that is a centre for recreational activities. The terminology used in the name of a property is not the sole criteria used in determining whether a property is a lodge. For instance, changing the name from lodge to business centre will not have an impact on the deductibility of expenses incurred at the property.
As you suggested, I am sending a copy of our correspondence to our western regional office so that they can be current on the issue. Should any of your members require assistance, I would suggest that they contact the director of the district taxation office serving their geographical location.
Yours sincerely,
R.S. Biscaro
A/Director General
Rulings Directorate
Policy and Legislation Branch
Bill Kerr
5-941920, 4-941841
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