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.
942439
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
November 21, 1994
Dear Sir/Madam:
Re: Expenses incurred at Lodges and Resorts
This is in response to your letter of September 14, 1994, wherein you requested information about obtaining an advance tax ruling concerning allowable expenses incurred at lodges and resorts.
The procedures for requesting an advance income tax ruling in respect of proposed transactions are outlined in Information Circular IC-70-6R2, a copy of which is attached. However, as indicated in paragraph 14(j) the Department does not usually rule where a matter on which a determination is requested is primarily one of fact and the circumstances are such that all pertinent facts cannot be established at the time of the request for the advance ruling. The Rulings Directorate has also published the attached pamphlet which outlines all of the services we provide. We can at this time, however, offer the following general comments.
Inter alia, paragraph 18(1)(l) of the Income Tax Act (the "Act") denies the deduction of expenses incurred for the use of property that is a yacht, a camp, a lodge or a golf course or facility. However, the Department's position is 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 word "lodge" is not defined in the Act. However, the Department considers the word "lodge", for this purpose, to mean an inn or resort hotel, particularly one that is a centre for recreational activities, as well a dwelling occupied on a seasonal basis in connection with particular activities, such as hunting or fishing. This is consistent with its ordinary meaning as found in the Eighth Edition of the Concise Oxford Dictionary where it defines the word "lodge" in part as "...any large house or hotel especially in a resort..." and it defines "resort" as "...a place frequented especially for holidays or for a specified purpose or quality (seaside resort, health resort)...". The determination of whether a particular inn or resort hotel is a lodge would require an examination of all facts and other relevant information. The factors that would be looked at would include the location of the hotel, whether it is operated on a seasonal or year round basis, the type of facilities offered and whether the facilities offered are the primary, secondary or incidental focus of the hotel.
In situations involving lodges and resorts at least two questions of fact would need to be resolved. The first would be whether a particular property would be considered to be a "lodge", and the request for such a determination would have to be made by the owner of that property. The second would be a determination of the purposes that a particular person will use such a property, and this request would have to be made by the potential user of the property. However, it should be noted that such a purpose determination is difficult to make in advance and can usually only be done after the fact taking into consideration the actual use made of the particular property.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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