20 July 1998 Internal T.I. 9815636 - FITNESS EQUIPMENT - DEDUCTIBLE?

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 cost of treadmill running machine deductible as a business expense.

Position: No.

Reasons: The benefit from the machine would principally accrue to the shareholder-employees and not to the company.

							July 20, 1998

	Business Services				HEADQUARTERS
	Vancouver Island Tax Services		Wm. P. Guglich
(613) 957-2102
	Attention: B. Hillard
							981563

Treadmill Running Machine - Deductible as a Business Expense

This is in response to your Facsimile of June 15, 1998, concerning the deductibility, as a business expense, of the cost of a treadmill running machine. The letter dated June 15, 1998 from XXXXXXXXXX, which you forwarded to us, describes the following situation:

• The treadmill running machine was purchased by a taxpayer XXXXXXXXXX.
• The taxpayer is a company which does XXXXXXXXXX.
• The company has two employees, both of which are shareholders of the company.
• The company operates from the principal residence of the shareholders.
• The taxpayer feels that the treadmill is a necessary piece of business equipment for the physical fitness of the employees.

The letter from XXXXXXXXXX outlines a transaction that has apparently been completed. As the review of such transactions falls within the responsibility of the Taxation Service Offices, we are providing you with the following general comments which we hope will be of assistance.

OUR COMMENTS

In the present case, where the company carries on the business of XXXXXXXXXX, the benefit from the treadmill running machine would, in our view, accrue principally to the individuals. Since the recipients of the benefit are both shareholders and employees, the benefit is considered to be derived in their capacity as shareholders and is taxable as a shareholder’s benefit under subsection 15(1) of the Act. Please refer to the comments in paragraph 9 of Interpretation Bulletin IT-160R3, respecting the tax treatment of shareholder-employee benefits generally.

Paragraph 11 of IT-432R2 may be of assistance in determining the value of the benefit for purposes of subsection 15(1) of the Act.

As for the company, no deduction would be allowed, in respect of the shareholder benefit, by virtue of paragraph 18(1)(a) of the Act and paragraph 1102(1)(c) of the Income Tax Regulations (see paragraph 9 of IT-160R3 and paragraph 14 of IT-432R2).

We trust our comments will be of assistance.

B.W. Dath
Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch