6 March 2012 External T.I. 2012-0436791E5 - Golf Transfer Fee

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.

Principal Issues: Whether a Golf transfer fee paid to a golf course was a deductible expense or an addition to the Adjusted Cost Base of the Golf share.

Position: The golf transfer fee is a non-deductible expense to the corporation.

Reasons: Legislation.

XXXXXXXXXX 							2012-043679
								John Parker CMA
March 6, 2012

Dear XXXXXXXXXX :

Re: Golf Transfer Fee

We are writing in response to your correspondence dated February 15th 2012 wherein you asked our opinion on whether a "Golf Transfer Fee" paid to a golf course, on the purchase of a golf share (through a corporation) from a third party or from the golf course treasury was a deductible expense or an addition to the Adjusted Cost Base ("ACB") of the golf share.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we are prepared to offer the following general comments.

Subsection 18(1) of the Income Tax Act (the "Act") entitled "General Limitations" states:

"In computing the income of a taxpayer from a business or property no deduction shall be made in respect of..."

Subparagraph 18(1)(l)(i) of the Act entitled "Use of recreational facilities and club dues" states:

"an outlay or expense made or incurred by the taxpayer after 1971,
(i) for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility, unless the taxpayer made or incurred the outlay or expense in the ordinary course of the taxpayer's business of providing the property for hire or reward..."

In the Supreme Court of Canada decision in Nowegijick v. HMQ, Docket 15833, 83 DTC 5041, Dickson, J stated:

"The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters."

In our opinion, a "Golf Transfer Fee" is not a deductible expense pursuant to subparagraph 18(1)(l)(i) of the Act. The words "in respect of" in subsection 18(1) of the Act gives a wide scope to the types of golf expenses disallowed. "Golf Transfer Fees" are non-deductible as they can be considered to be "in respect of" an outlay or expense made by the taxpayer for the use of property that is a golf course.

There is no provision of the Act that would permit the addition of the non-deductible "Golf Transfer Fee" to the ACB of the property (the Golf share) such that it would reduce any gain or increase any loss otherwise determined on a disposition of the property.

We trust our comments will be of assistance to you.

Yours truly,

Doug Watson
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch