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Principal Issues: [TaxInterpretations translation] May the annual meeting of the members of the Corporation of Master Pipe Mechanics of Quebec [Corporation des maîtres mécaniciens en tuyauterie du Québec] (CMMTQ) and the MCEE trade show of which the CMMTQ is the co-organizer with other organizations or associations of complementary sectors of activity be considered as a convention for the purposes of subsection 20(10) of the Income Tax Act?
Position:Yes, in the two cases.
Reasons: Under the jurisprudence, our previous positions and the criteria in Interpretation Bulletin d'interprétation IT-131R2.
Lucie Allaire, Advocate,
CGA, D. Fisc.
May 30, 2011
Subject: Definition of the term "convention"
This is in response to your email dated January 25, 2011 in which you requested our opinion as to whether certain events offered to the members of the Corporation of Master Plumbing Mechanics of Quebec [Corporation des maîtres mécaniciens en tuyauterie du Québec] (the "CMMTQ") qualify as conventions. In this regard, we took into consideration the additional information provided on May 26, 2011 by telephone conversation (XXXXXXXXXX/Allaire).
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
Specifically, you asked if the following two events are conventions for the purposes of subsection 20(10):
1. the annual general meeting of the members of the CMMTQ to which only the members are invited and may attend; and
2. the MCEE trade show (Mécanex, Climatex, Expolectriq, Éclairage) [Mechanics, Climate control, Electricity and Lighting], of which the CMMTQ is the co-organizer, and which offers, among other things, conventions in which all the members of the industry, whether or not members of the CMMTQ, can participate.
According to the CMMTQ website, the organizers of the MCEE are the CMMTQ, the Canadian Plumbing and Heating Institute, the Corporation des maîtres électriciens du Québec [Corporation of Master Electricians of Quebec] and the Corporation des entreprises en traitement de l'air et du froid [Air and Refrigeration Corporation]. In addition, the MCEE is described as the largest trade show for plumbing, heating, air conditioning, refrigeration, ventilation, fire protection, electricity and lighting in Canada.
It appears to us that the situation described in your letter could constitute an actual situation involving taxpayers. As stated in paragraph 22 of Information Circular 70-6R5, it is not the practice of the Directorate to provide comments regarding proposed transactions otherwise than through advance rulings. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documents to the appropriate Tax Services Office for their opinion. However, we can offer the following general comments that may be helpful to you.
Under the Act, a taxpayer who carries on business or derives income from property may deduct expenses incurred to earn income from the business or property. However, the Act specifically prohibits the deduction of expenses that are personal in nature, of a capital nature or that are not reasonable in the circumstances.
Under paragraph 1 of Interpretation Bulletin IT-131R2, Convention Expenses, subsection 20(10) permits a self-employed taxpayer who is carrying on a business or practising a profession to deduct, in computing income for a taxation year from a business, expenses incurred in attending not more than two conventions a year provided that:
(a) it is held by a business or professional organization,
(b) it is attended in connection with the taxpayer's business or professional practice, and
(c) it is held at a location that may reasonably be regarded as consistent with the territorial scope of the organization.
In that regard, it is not necessary for the taxpayer to be a member of the organization responsible for the convention, but the taxpayer’s presence at the convention must be related to the business the taxpayer carried on or the profession the taxpayer practises.
However, we reiterate that under subsection 8(2), employees cannot under any circumstances deduct expenses incurred to attend conferences in computing their income.
Furthermore, according to IT-131R2, the term "convention" is defined as a formal meeting of members of an organization for professional or business purposes.
Consequently, based on the information available to us, we are of the view that the CMMTQ Annual Meeting and the MCEE Trade Show could be considered conventions for the purposes of the Act, and the related expenses could be deductible by a taxpayer carrying on business if all the conditions of subsection 20(10) are otherwise satisfied.
Finally, to find out about the conditions surrounding the application of subsection 20(10), we invite you to consult Interpretation Bulletin IT-131R2, which you have the link to, as well as paragraphs 9 and 10 of Interpretation Bulletin IT- 357R2, Expenses of training, which is available on our website at the following address: http://www.cra-arc.gc.ca/E/pub/tp/it357r2/it357r2-e.html
François Bordeleau, Advocate
Business and Partnerships Section
Income Tax Rulings Directorate
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