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 at a golf club would be disallowed under subparagraph 18(1)(l)(i) of the Act.
Position TAKEN:
Green fess or membership fees would be disallowed under the provisions of paragraph 18(1)(l). Expenses incurred for food or beverages consumed in the club dining room would not provided that each expense is clearly itemized. However, such expenses would be subject to the limit in subsection 67.1(1).
Reasons FOR POSITION TAKEN:
Previous position.
943067
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
October 3, 1995
Dear Sir/Madam:
Re: Subparagraph 18(1)(l)(i) of the Income Tax Act
This is in response to your letter of November 28, 1994, wherein you requested our views concerning subparagraph 18(1)(l)(i) in connection with costs incurred at a golf club. We apologize for the delay in responding.
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."
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 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.
Clearly, green fees for the use of a golf course or membership fees in a golf club would be denied under the provisions of paragraph 18(1)(l) of the Act.
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 and not part of an all inclusive charge they would not be subject to the provisions of subparagraph 18(1)(l)(i) of the Act. Such expenses would instead be subject to the limit provided under subsection 67.1(1) unless clearly excepted by virtue of the provisions of subsection 67.1(2).
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
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