2 October 1995 External T.I. 9428505 - USE OF A GOLF CLUB

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.

Principal Issues:

Whether the expenses incurred for a staff Christmas party held at a golf club would be disallowed under subparagraph 18(1)(l)(i) of the Act.

Position TAKEN:

No, provided that each expense is clearly itemized. However, they would be subject to the limit in subsection 67.1(1) unless the exception in paragraph 67.1(2)(e) applies.

Reasons FOR POSITION TAKEN:

Administrative concession and the modern rule of statutory interpretation.

		942850
XXXXXXXXXX	B. Kerr

Attention: XXXXXXXXXX

October 2, 1995

Dear Sirs:

Re: Subparagraph 18(1)(l)(i)

This is in response to your letter of October 13, 1994, wherein you requested our views concerning subparagraph 18(1)(l)(i) in the light of the decision of the Supreme Court in the Sie Mac Pipeline Contractors Ltd. case (93 DTC 5158) and the Department's announcement that it was reviewing its position. We apologize for the delay in responding.

In your letter you expressed concerns with respect to expenses incurred at a golf club when it is used for a staff Christmas party or when a particular property described in subparagraph 18(1)(l)(i) is used for a business meeting.

Our Comments

The Department has completed the review of, and will maintain, the position as announced in response to question 60 at the 1993 Revenue Canada Round Table held at the annual conference of the Canadian Tax Foundation where we stated:

"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."

This position will allow the deduction of expenses for genuine business meetings held at such properties. 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.

With respect to expenses incurred for food and beverages at a golf club or for the use of the dining room, lounge, banquet hall or conference room of a golf club, provided that each expense is clearly itemized they would not be subject to the provisions of subparagraph 18(1)(l)(i). Such expenses would instead be subject to the limit provided under subsection 67.1(1) of the Act. However, as stated in paragraph 2(e) of Interpretation Bulletin IT-518, costs incurred for a Christmas party to which all employees at a particular location have access may fall within the exception provided under paragraph 67.1(2)(e).

As stated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, the opinions expressed in this letter are not rulings and are consequently not binding on the Department.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch