30 June 1999 External T.I. 9909285 - NPO-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 property used exclusively for and directly...

Position: Question of fact

Reasons:

XXXXXXXXXX 990928
B. Kerr
Attention: XXXXXXXXXX

June 30, 1999

Dear Sirs:

Re: Subsection 149(5) of the Income Tax Act (the “Act”)

This is in response to your letter of March 31. 1999, wherein you requested our views on the meaning of the words “exclusively” and “directly” as used in subparagraph 149(5)(e)(ii) of the Act.

You have described a situation involving a non-profit organization that owns and operates a golf course. The golf club owns a large parcel of land that was purchased fourteen years ago for the purpose of building a golf course and to be used solely as a golf course. The club is contemplating the sale of a very small portion of that parcel which was used as a driving range for three years, then as a pitching area, a nursery for growing trees and replacement sod to be used in the repair and replacement of damaged greens and fairways, and as an experimental area for the testing of chemical treatments and grass heights.

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 fall within their responsibility and it is the practice of the Department not to comment on such transactions when the identities of the taxpayers are not known. In the case of 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 IC-70-6R3 dated December 30, 1996, issued by Revenue Canada. In particular we refer to paragraph 15(j) thereof concerning requests for a determination of fact. However, we can offer the following general comments.

Generally, a non-profit organization is exempt from Part I tax by virtue of paragraph 149(1)(l) of the Act. Subsection 149(5) of the Act overrides this exemption and taxes the income from property and the taxable capital gains of a non-profit organization that has as its main purpose the provision of dining, recreational or sporting facilities for its members. However, subparagraph 149(5)(e)(ii) provides an exception from the inclusion in income of the taxable capital gain of a non-profit organization for a property that was used exclusively for, and directly in the course of, providing the dining, recreational or sporting facilities for its members. It is a question of fact whether a particular property is used in such a manner.

The word “exclusive” is defined in the Concise Oxford Dictionary to mean “shutting out;...excluding all but what is specified; employed or followed or held to the exclusion of all else...” and the word “directly” is defined to mean “in a direct manner; exactly; at once..., without delay; presently, in no long time...”.

We trust that these comments will be of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch