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.
MINISTER/DM'S OFFICE 94-08575M, 94-00927M
ADM'S OFFICE
CENTRAL RECORDS
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT OR CORPORATE FILE
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable David Anderson, Minister of National Revenue, has asked me to respond to your letter of July 25, 1994, concerning the deduction of expenses incurred at resorts. I apologize for the delay in replying.
In your letter, you referred to a meeting held on June 8, 1994, which was attended by you and XXXXXXXXXX
and Messrs. Biscaro and Dath as officials of the Department. You noted that you had not yet received a written response following that meeting. However, I understand that the Department replied to XXXXXXXXXX on August 2, 1994, concerning that meeting prior to the receipt of your letter on August 5.
The Income Tax Act prohibits the deduction of expenses incurred for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility. The Department has interpreted this to mean that, where this property 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 fall within the restriction. This is a fair and liberal interpretation which allows the deduction of reasonable expenses for genuine business meetings held in resort hotels. However, no deduction is available in situations where some business meetings may be involved but 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 criterion 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.
Whether the deduction of any particular expenditure for the use of a lodge is restricted by the application of paragraph 18(1)(l) is a question of fact that can only be determined after a complete review of the circumstances of that particular situation, including a determination of all uses of the property. It is also a question of fact whether the other facilities described in your letter would be considered to be one of the types of property referred to in paragraph 18(1)(l) and whether the deduction of expenditures incurred for their use would be restricted.
I trust that I have explained the Department's position on this matter.
Yours sincerely,
Pierre Gravelle, Q.C.
Bill Kerr
4-942068
October 20, 1994
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