| 19(1) | File No. 5-8189 |
| R.B. Day | |
| (613) 957-2136 |
July 20, 1989
19(1)
We are writing in reply to your letter of June 1, 1989, wherein you requested that we review the position set out in our letter of May 11, 1989, regarding the deductibility of condominium fees related to the reserve fund of a condominium corporation.
With respect to our previous letter, the opinion given regarding the matter was based on comments received from our advisors in the Department of Justice regarding the legal relationship that subsists between condominium corporations and their members.
In this regard we were advised that a condominium corporation is not a separate and distinct entity for income tax purposes and that the relationship subsisting between the condominium membership and the condominium corporation itself could properly be described as one of agency. This is based on the fact that under the Condominium Act of Ontario, the condominium corporation has the duty to manage the owner's property and is given power to act on their behalf on related matters. Further, the condominium corporation has no ownership in the condominium property as the condominium corporation's assets are owned by the members and they, in turn, are personally liable for the debts of the corporation.
The position set out above is based on the relevant provisions in the Condominium Act of Ontario and relates only to corporations incorporated under the Condominium Act of Ontario.
Consequently, we confirm the opinion expressed in our letter of May 11, 1989 that amounts included in the reserve fund of condominium corporation will not be deductible until expended by the condominium corporation for maintenance or repairs. If the funds are used for capital additions, they would be capitalized by the unit holder when they have been expended by the condominium corporation. This will, of course, involve a finding of fact in each case.
We trust our comments are of assistance.
Yours truly,
for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch