7 August 1996 External T.I. 9621805 - FOOD AND BEVERAGES AT 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.

		962180
XXXXXXXXXX	B. Kerr

Attention: XXXXXXXXXX

August 7, 1996

Dear Sirs:

Re; Food and Beverages at Golf Clubs

This is in response to your letter of June 13, 1996, wherein you requested our views concerning the application of subparagraph 18(1)(l)(i) and subsection 67.1(1) of the Income Tax Act (the "Act") in connection with the cost of food and beverages consumed at a golf club.

In your letter you have identified three situations as follows:

1.A taxpayer has a golf day for all staff. The day consists of a round of golf or the use of the tennis facilities, lunch and dinner.

2.A taxpayer hosts a dinner or christmas party for all staff in the banquet hall/dining room of the golf club. No use is made of any other facilities.

3.The taxpayer has a breakfast meeting at the golf club with a client, followed by a round of golf with another client.

In all three situations, the amounts were incurred for the purpose of gaining or producing income and were reasonable in the circumstances.

You have asked which provisions of the Act would apply to each of these situations.

Our Comments

The situation outlined in your letter involves an actual fact situation. To the extent that it relates to a past transaction you should contact the appropriate Tax Services Office, since the review of such transactions falls within their responsibility and it is the practice of this Department not to comment on such transactions when the identities of the taxpayers are not known. If it relates to a proposed transaction, assurance as to the tax consequences of actual proposed transactions will only be given in the context of an advance income tax ruling. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R2 (IC 70-6R2) dated September 8, 1990 issued by Revenue Canada, Taxation. However, we can offer the following general comments which we hope will be of assistance to you.

Subparagraph 18(1)(l)(i) of the Act, refers, inter alia, to a golf course or facility, which includes the dining room of a golf club in a situation where it is used in conjunction with a game of golf or other recreational activity at the club. Accordingly, in the situations described in 1 and 3 above, all costs incurred would be disallowed under the provisions of subparagraph 18(1)(l)(i).

The otherwise deductible cost of the consumption of food or beverages is restricted under section 67.1 of the Act. Subsection 67.1(1) limits such costs to 50%, unless clearly excepted by virtue of the provisions of subsection 67.1(2). 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) of the Act. Accordingly, in the situation described in 2 above, the provisions of subparagraph 67.1(2)(e) may apply.

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 Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch