Golfing as an expense

[wayland]

Any accountants here?

Is it ok for a corporation to own a golf membership at a private golf club?

[Shake99]

not an accountant but my quick answer is YES know many companies that do.

[ForeontheFloor]

I am no corporation but I claim some of my golf. It probably helps that I have a golf business though.

[akrus]

I'm going with no on this. I believe there was a recent change (ie: 2 or 3 years back) that made it unacceptable.

disclaimer: I'm not an accountant, the info is just something I recall reading or hearing somewhere.

[mikejb]

This is new BTW.
--------------------------------
Shareholder Benefits

A key point shareholder-employees must keep in mind is that the rules we've just discussed may not apply to them. That is, benefits provided to employees and benefits provided to shareholders may be taxed differently.

The shareholder benefit rules simply look at the value of a benefit provided to you as a shareholder, and special rules don't apply. To be treated as an employee, you need to demonstrate that you received the benefit by virtue of your employment and not by virtue of your shareholdings. You would ordinarily do this by showing that non-shareholders in your organization received the same benefit, or that it is common for employers to provide similar benefits to non-shareholder employees in general who have the same job function.

A recent case highlighted that where a shareholder does receive a benefit, it seems that the benefit will be presumed to be a shareholder benefit. The facts of the case were straight forward—the taxpayer was the sole shareholder and key employee of a corporation carrying on a trucking business. The corporation purchased a golf membership with the taxpayer and his spouse as listed nominees. The corporation correctly excluded the membership fee as a tax deduction (as club dues are non-deductible). However, the CRA reassessed the taxpayer and included the full amount of the membership fee in income as a shareholder benefit.

When the case went to the Tax Court, the taxpayer was able to establish that he entertained clients about 60% of the time, while the other 40% of the golf he played was categorized as personal. So, the Tax Court judge reduced the benefit to 40% of the value of the membership fee. However, there was no discussion in the ruling on whether the taxpayer received the use of the golf club by virtue of his employment or by virtue of being a shareholder. It would seem that the judge simply assumed that the membership fee was incurred by virtue of the taxpayer's shareholding and the taxpayer didn't dispute it. Presumably, there was an argument that many non-shareholder corporate executives are given privileges at a golf club where it is deemed beneficial to the employer for the employee to entertain clients and contacts at the club. So, it may not be unreasonable that a non-shareholder with the taxpayer's responsibilities could be entitled to similar privileges. Also, given that he established that he spent more time entertaining contacts than enjoying the facilities personally, one would assume he could have fallen under the business purpose test—that no taxable benefit applies where the primary beneficiary of the expenditure is the employer.

This case also provides useful advice for all employees— the CRA may look at golf club dues as "an assumed benefit", and it may be advisable to keep track of recreational club use to establish that the majority of the membership use is for business purposes.

If you have any questions on the tax consequences associated with employment-related benefits, contact your BDO advisor.

From - http://www.bdo.ca/en/library/publications/taxpub/taxfactors/0503/BDODunwoodyTaxFactor06-02b.cfm

[el tigre]

Any accountants here?

Is it ok for a corporation to own a golf membership at a private golf club? If you're asking whether or not the expense is deductible for tax purposes for the corporation, I'm 90% sure the answer is "No":

http://www.cra-arc.gc.ca/E/pub/tp/it148r3/it148r3-e.html#P87_9211

Furthermore if the membership is actually in the name of an employee of the corporation, then it may have to be included in employee's income as a taxable benefit.

BTW I'm not an accountant but I majored in accounting in university and worked at both CCRA and H & R Block a long, long time ago in another life.

[wayland]

Darn. Sounds like it's too troublesome.

Was thinking that the membership could be in the name of my corporation and as an executive I could use it. But if I'm going to be required to prove that it's used to entertain clients the majority of the time...that might be hard to do :rolleyes:

Thanks for the replies.

[Bellyhungry]

I know an executive of a large organization here in Canada got a letter from Revenue Canada asking him to provide proof that the business golf trips he went on over the last 10 years were indeed business-related.

They asked him for photograph, meeting notes, etc for each events. In the letter, they noted that if he can not provide proof, they will deem them as taxable benefits.

[bythehour]

Pretty good advice here.

1. Are golf memberships and greens fees deductible as business expenses? No.

2. Are the personal elements of golf memberships/fees that are paid by a business for an employee taxable? Yes.

Yeah, it's a double-whammy!

[overpar]

I asked my accountant, and he said "NO".