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 all expenditures at a golf course or facility that involve entertainment or recreation of clients suppliers, shareholders or employees are deductible.
Position TAKEN:
Green fees or membership fees in a golf club are not deductible by virtue of the provisions of paragraph 18(1)(l). Expenses incurred for food or beverages or for the use of the dining room, lounge banquet hall or conference room of a golf club, provided each expense is clearly itemized and not part of an all inclusive charge, are not subject to the provisions of paragraph 18(1)(l) but are subject to the limit under subsection 67.1.
Reasons FOR POSITION TAKEN:
Meaning of the term "facility" and previous position.
October 6, 1995
Calgary Tax Services Office HEADQUARTERS
G. C. Hoard B. Kerr
Assistant Director - Audit 613-957-2139
Attention: Rob Veltri
951918
Expenditures incurred at a Golf Club
This is in reply to your memorandum of July 12, 1995, wherein you requested our comments concerning your reassessing position as a result of the Federal Court of Appeal's decision in the Sie Mac Pipeline Contractors Ltd. case (92 DTC 6461) and affirmed by the Supreme Court (93 DTC 5158).
Your position is that expenditures at a golf course or facility that involve entertainment or recreation of clients, suppliers, shareholders or employees are never deductible.
As you know the Department was asked to comment on this issue at the 1993 annual conference of the Canadian Tax Foundation in light of the decision of the Supreme Court in the Sie Mac case where in response to question #60 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."
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. In our view, green fees or membership fees in a golf club would clearly 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 paragraph 18(1)(l) of the Act. Such expenses would instead be subject to the limit provided under subsection 67.1(1) of the Act, unless otherwise excepted by virtue of the provisions of subsection 67.1(2) of the Act.
This view is based on our interpretation that the word "facility" is used only to extend the meaning of "golf course" in subparagraph 18(1)(l)(i) of the Act to include recreational facilities, it does not include the dining room, lounge, or banquet hall of a golf club.
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
cc. E. Gauthier
A/Director General
Audit Directorate
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