Case is made for company golf tab

National Post

2006-05-20


Victoria Day weekend officially marks the beginning of golf season. A recent
tax case dealing with a corporate golf membership may open up an opportunity to
golf on your employer's tab.

Duncan Gillis is the president, principal shareholder and principal
salesperson for Gillis Truckways Inc., a Nova Scotia company that sells truck
trailers throughout the Maritimes. From 1999 through 2005, Truckways had sales
between $3-million and $5.5-million annually.

In May, 2000, Truckways purchased a corporate golf membership at the Bell Bay
Golf Club in Baddeck, N.S. for $13,800. According to Mr. Gillis, Bell Bay is
rated one of the best golf courses in the region.

The corporate membership, under which both Mr. Gillis and his wife, Beth,
were listed as nominees for Truckways, allowed them to play unlimited golf at
Bell Bay. They also enjoyed reduced green fees for any of their guests.

The Canada Revenue Agency audited Truckways for the 2000 tax year and came
across the $13,800 golf membership paid for by the company. The issue was not
whether Truckways could deduct the golf membership (it did not, since the Income
Tax Act specifically disallows the deductibility of any golf-related expenses),
but whether or not Mr. Gillis should personally be assessed a taxable benefit
equal to the $13,800 value of the golf membership paid for by the company.

The case made its way to the Tax Court of Canada. Mr. Gillis testified that
he frequently entertains customers and pros-pects of Truckways by paying for
their green fees. Since the company owns a corporate membership in Bell Bay, the
green fees for any guests are reduced from $65 to $40 per round of golf.

Mr. Gillis estimated that he played 50 rounds of golf per year between 2000
and 2005, and that approximately 30 rounds were with customers or prospects. The
other 20 rounds or so each year were with personal friends.

His argument was that the corporate membership saved Truckways "significant
green fee expenses," which he attempted to quantify by multiplying the savings
($25 per golfer times three invited golfers per round, or $75) by the number of
rounds played annually for business (30) multiplied by six years (2000 through
2005). The total savings to Truckways amounted to $13,500. Since this was
basically the cost of the membership, he felt no amount should be considered a
taxable benefit to him. Mr. Gillis also testified that he generated
approximately $5.75-million in business over the past five years from customers
with whom he golfed.

After reviewing the evidence, the judge was "satisfied that [Mr. Gillis] was
successful in establishing valuable business relationships for Truckways by
playing golf with customers and potential customers."

Although he was "convinced that Truckways received a significant business
benefit," he still felt that Mr. Gillis received a personal benefit as a result
of the corporate golf membership at the Bell Bay golf course.

The judge determined that since 20 of the approximately 50 rounds played
annually were "personal" in nature, his assessed taxable benefit of $13,800
ought to be reduced to only 40% of $13,800 or $5,520.

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