| 24(1) | 901799 |
| M. Eisner | |
| (613) 957-2138 |
19(1)
November 1, 1990
Dear Madam:
This is in reply to your letter of August 7, 1990 concerning whether the costs incurred by your corporation in providing you with French language training are deductible.
24(1) Your concern is whether your corporation is entitled to deduct the training costs.
The determination as to the deductibility of expenses can only be made following a review of all the relevant facts and related documentation. However, your concern is generally addressed in paragraph 7 of Interpretation Bulletin IT-357R2. This paragraph indicates that an employer may normally deduct expenses incurred in respect of an employee's training regardless of whether it is the employer or employee who benefits from the training, provided that such expenses are reasonable in the circumstances.
Please note further two other comments contained in that paragraph which may be relevant to your situation. The first is that if it is the employee and not the employer who primarily benefits from the training, a taxable benefit to the employee under paragraph 6(1)(a) of the Income Tax Act (the Act) is considered to result. The second is that a corporate employer may not deduct training costs which have been included in a shareholder's income under subsection 15(1) of the Act, on the grounds that the employee received the benefit of the training in his/her capacity as a shareholder. It is our understanding that you are the controlling shareholder of the corporation.
However, as the information you provided indicates that the training is directly related to the income earning activities of your company, it appears that the training expenses are deductible provided they are reasonable. Based on this same reasoning, it appears that you would not be in receipt of a benefit that would be required to be included in your income by virtue of paragraph 6(1)(a).
As a final comment, we would note that the comments in paragraphs 3 and 4 of IT-357R2, to which you referred in your letter, were made in respect of self-employed individuals rather than the employee/employer type of situation.
These comments represent the Department's opinion only and as such is not considered binding on Revenue Canada, Taxation.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch