7 October 1991 Income Tax Severed Letter - Deduction of Convention Expenses

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.

XXX

We are writing in reply to your letter of August 15, 1991, wherein you requested clarification of the Department's position on the deduction of convention expenses under subsection 20(10) of the Income Tax Act (the Act) relative to the comments set out in paragraphs 2 and 3 of Interpretation Bulletin IT-131R2.

Sponsoring Organization

In this regard, you have requested that we confirm your understanding that self employed persons affiliated with a national sales organization would be entitled to deduct expenses to attend a convention of the national organization. In this regard, you have assumed that local sales representatives of organizations such as XXX would be entitled to travel to convention/sales meetings held by the national organization. You have also assumed that the Department would look to the self-employed person's ties to the national organization in determining whether a convention is a qualifying convention.

Our comments

Whether or not a particular self-employed person is entitled to deduct the costs of attending a particular convention in a year, involves a finding of fact that can only be determined after the particular individual has filed the appropriate income tax return. In this regard, we draw your attention to the comments in paragraph 1 of IT-131R2, which sets out the Department's views on the interpretation of subsection 20(10) of the Act.

With respect to your questions regarding sponsoring organisations and qualifying conventions, the following concluding comments in paragraph 1 would appear to be relevant:

"It is not necessary that the taxpayer be a member of the organization sponsoring the convention but attendance at the convention must be related to the business or professional practice carried on by the taxpayer."

Although a taxpayer's ties to a national organization may be a factor in determining whether or not the convention expense claim is valid, a taxpayer's ties to a particular organization would not, in and by itself, necessarily establish that the convention is what you refer to as a qualifying convention.

The term "sponsoring organization" does not appear in the Act and is used in IT-131R2 merely as a descriptive term in explaining the income tax implications of subsection 20(10) of the Act. We know of no conditions that must be met in order to be part of a sponsoring organization.

Qualifying Ocean Cruises

Since the comments in paragraph 2 of IT-131R2 state that a convention held during an ocean cruise is considered as being held outside Canada, you have requested our comments on the impact of Article XXV(9) of the Canada - U.S. Tax Convention (the USTC) in the following hypothetical situations:

• • cruise from Miami - Caribbean - Miami with stopovers only at U.S. cruise ports;
• • cruise from Miami - Caribbean - Miami with stopovers at various ports including non-U.S. ports such as St. Maarten; and
• • cruise from Montreal to Miami to Vancouver to Alaska staying at all times within the territorial waters of Canada and the U.S.

(In this regard you have asked us to assume that the amounts paid would otherwise meet the requirements of subsection 20(10) of the Act.)

Our Comments

It is the Department's position that Article XXV(9) of the Convention permits the deduction of reasonable expenses incurred by a Canadian taxpayer in attending a convention held anywhere in the U.S. by a Canadian organization that is national in character provided that the other requirements of subsection 20(10) of the Act are met.

Paragraph 2 of IT 131R2 [IT-131R2] states that a convention held during an ocean cruise is considered as being held outside Canada. Since Article XXV(9) of the USTC does not override the territorial scope limitations contained in subsection 20(10) of the Act is follows that none of the costs related to the cruises described above, would qualify as convention expenses.

We trust our comments will be of assistance to you.