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:
Deductibility of expenses incurred at resorts and lodges.
Position TAKEN:
The Department's position is that where property of a type described in subparagraph 18(1)(l)(i) is used for genuine business purposes, which purposes do not include the entertainment or recreation of clients, suppliers, shareholders or employees, the Department will not consider that the related expenses, provided they are reasonable, fall within the provisions of paragraph 18(1)(l). Nevertheless, no deduction is available in situations where some business meetings may be involved but the main activity is recreation.
In situations involving resorts and lodges, at least two questions of fact would need to be resolved. The first would be whether a particular property would be considered to be a "lodge", and the second would be a determination of the purposes for which a particular person will use such a property.
Reasons FOR POSITION TAKEN:
Inter alia, paragraph 18(1)(l) denies a deduction for outlays or expenses made or incurred by a taxpayer for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility. The above described position, however, is a fair and liberal interpretation. This position was expressed at the 1984 CTF Conference and maintained by the Department following its review of Sie-Mac Pipeline Contractors Ltd (92 DTC 6461, 93 DTC 5158).
5-950474
XXXXXXXXXX M. Azzi
July 20, 1995
Dear Sir:
Re: Expenses Incurred at Resorts and Lodges
This is in reply to your letter of February 20, 1995, wherein you requested information regarding the deduction of expenses incurred at resorts and lodges. We apologize for the delay in responding to your request.
Inter alia, paragraph 18(1)(l) of the Income Tax Act (the "Act") denies a deduction for outlays or expenses made or incurred by a taxpayer for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility. However, the Department's position is that where such a property is used for genuine business purposes, which purposes do not include the entertainment or recreation of clients, suppliers, shareholders or employees, the Department will not consider that the related expenses, provided they are reasonable, fall within the provisions of paragraph 18(1)(l) of the Act. Nevertheless, no deduction is available in situations where some business meetings may be involved but the main activity is recreation.
The word "lodge" is not defined in the Act. However, the Department considers the word "lodge", for this purpose, to mean an inn or resort hotel, particularly one that is a centre for recreational activities, as well a dwelling occupied on a seasonal basis in connection with particular activities, such as hunting or fishing. This is consistent with its ordinary meaning as found in the Eighth Edition of the Concise Oxford Dictionary, where it defines the word "lodge" in part as "...any large house or hotel especially in a resort..." and it defines "resort" as "...a place frequented especially for holidays or for a specified purpose or quality (seaside resort, health resort)...". The determination of whether a particular inn or resort hotel is a lodge would require an examination of all facts and other relevant information. The factors that would be looked at would include the location of the hotel, whether it is operated on a seasonal or year round basis, the type of facilities offered and whether the facilities offered are the primary, secondary or incidental focus of the hotel.
In situations involving resorts and lodges, at least two questions of fact would need to be resolved. The first would be whether a particular property would be considered to be a "lodge", and the request for such a determination would have to be made by the owner of that property. The second would be a determination of the purposes for which a particular person will use such a property, and this request would have to be made by the potential user of the property. However, it should be noted that such a purpose determination is difficult to make in advance and can usually only be done after the fact taking into consideration the actual use made of the particular property.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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