20 September 1994 Internal T.I. 9417527 - ELIGIBILITY OF TEACHING SUPPLIES AS DEDUCTIBLE EXPENSE

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 teacher's supplies under 8(1)(i)(iii)

Position TAKEN:

Question of Fact. If there is no requirement either express or "implied" for the teachers to be responsible for the expenses, they do not qualify. In addition, all other provisions of the subparagraph must be met.

Reasons FOR POSITION TAKEN:

Application of legislation, interpretation bulletin, jurisprudence and previous correspondence position

		September 20, 1994

	XXXXXXXXXX District Office	HEAD OFFICE
	Enquiries and Adjustments	Rulings Directorate
D. Zion
(613) 957-8953
	Attention: XXXXXXXXXX

		941752

Eligibility of Teaching Supplies as Deductible Expense

We are writing in reply to your correspondence of June 30, 1994 in which you forwarded an enquiry regarding the above noted subject from the XXXXXXXXXX to this Directorate.

You have advised us that you recently denied a request for an employment expense claim to a teacher with the Board, XXXXXXXXXX because he did not demonstrate that it was in his contract to pay for these expenses. The denial of his claim has led to a request for clarification by the Board of the Department's position with respect to the deductibility of these expenses.

We have recently had occasion to review the eligibility of teaching supplies as a deduction pursuant to subparagraph 8(1)(i)(iii) of the Income Tax Act (the Act). In order to enable you to reply to the Board, we are providing you with our comments regarding the deductibility of teaching supplies as an employment expense.

Our Comments

Generally, subject to certification, subparagraph 8(1)(i)(iii) of the Act enables a taxpayer to deduct from income for a taxation year from an office or employment the "cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for...". Such expenses are deductible to the extent that the individual has not been reimbursed and is not entitled to be reimbursed for them. Paragraph 1 of Interpretation Bulletin IT-352R2: Employees' Expenses, Including Work Space in Home Expenses outlines the requirements which must be met and further discusses the issue of whether the requirement to pay for the supplies must be included in the contract of employment or may be implied. Although ordinarily this requirement necessitates that there be an express requirement within the terms of a written contract of employment, it is the Department's general position that this requirement may also be considered to have been satisfied where it is tacitly understood by the employer and the employee that the supplies be provided by the employee. This will be a question of fact and can only be determined through a review of the circumstances present in each case.

The application of paragraph 8 of the Act, depends essentially on the particular facts present in each case. There is numerous jurisprudence which deals with the issue of whether or not the phrase "required by the contract of employment" has been met. In the case of Carson v. M.N.R. (66 DTC 424), which most closely resembles the situation at hand, the appellant was a high school teacher who had sought to deduct as an expense, amongst other things, the cost of supplies he had used in connection with his teaching duties. The supplies in question included pens, pencils, paper clips, penmanship charts, a display board and books. Although none of these supplies were provided by the local school board, the appellant considered them necessary to the adequate performance of his job as the supplies were essential to his teaching programme. He argued that it was an implied condition of his contract of employment that he would provide the highest possible standard of instruction and it was generally accepted by teachers that they were required to obtain these supplies at their own expense. The Tax Review Board felt that there was some merit to the appellant's claims. It was found that a deduction should be granted to the appellant for supplies purchased by him and consumed in his teaching duties to the extent that the cost thereof is proven by receipts. The claim for books, in light of other decisions regarding "consumable supplies" was denied. This aspect is specifically discussed in paragraph 9 of IT-352R2.

In The Queen v. Gilling (90 DTC 6274) The Federal Court, Trial Division found in favour of the defendant who had attempted to deduct travel expenses, although the requirement to pay travel expenses was not explicitly noted in the contract of employment. The Court felt that the case was indistinguishable from the cases of Verrier v. The Queen (90 DTC 6202) and The Queen v. Betz (90 DTC 6201) both of which "recognized that a specific requirement for an employee to pay his own expenses ... need not be patently expressed in a contract of employment. A Court, upon studying the experience of the relationship and all surrounding circumstances may well apply common sense and conclude that these are implied terms".

In summary, we are of the opinion that, if there is no requirement either express or implied for the teachers to be responsible for the expenses, they do not qualify for a deduction under subparagraph 8(1)(i)(iii) of the Act. Certification by the Board that the conditions set out in subparagraph 8(1)(i)(iii) of the Act have been met and the subsequent purchase of supplies by the teacher could be an indication that there exists an implied condition of employment. This would be a question of fact to be determined upon a review of the circumstances present in each situation. In order to determine if an expense incurred by an employee was actually an implied requirement of the contract of employment, the Courts have reviewed whether or not the failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer.

We trust that our comments have been of assistance and will enable you to review the situation at hand and respond to the Board.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Policy and Legislation Branch