Forestry Canada International Division 351 Boulevard St. Joseph 900531 Hull, Quebec J.A. Szeszycki K1A 1G5 (613) 957-2103
Attention: Cameron Clarke
Dear Sirs:
Re: Overseas Study Tour Deductibility of Costs to a Canadian Taxpayer
Your enquiry of April 12, 1990, which you sent by facsimile to the Ottawa District Taxation Office, was forwarded to this office for reply. You have requested clarification as to Revenue Canada's position with respect to the tax treatment of costs such as were described in the letter of invitation received by 19(1) related to an overseas study tour. You have included a statement which indicated that participants in the tour that are United States residents would be able to deduct the expenses of the tour under Section 162 of the Internal Revenue Code.
Section 162 of the Internal Revenue Code includes a very general provision which allows for the deduction of "ordinary and necessary" expenses incurred in carrying on a trade or a business. This includes travelling expenses incurred by employed and self-employed individuals in the course of their employment or self-employment activity. The view expressed in the letter was that the tour costs would be deductible either as business travel or as an educational (training) cost. It would be difficult for us to comment as to what degree these claims would be successful in the United States.
In Canada, the rules concerning the deductibility of such costs are somewhat different. In the case of an individual such as 19(1) who is an employee of the Federal Public Service, it would first be determined whether he participated in the tour in his capacity as an employee of Forestry Canada or as a private citizen. If it were his employer's wish to have the employee participate in the tour the payment of the related costs would likely be covered by the employer and not be viewed as a benefit to the employee, except to the extent that the costs relate to any personal element to the trip (e.g. accompanying spouse, combined vacation). If his participation in the tour were in ,his capacity as a private citizen the costs incurred and paid by the taxpayer would not be deductible against employment income. Furthermore, if the employer paid any portion of the costs a taxable benefit would be considered received by the employee in respect of any amount so paid. As well, no portion of such costs could be used in the computation of tuition or education tax credit since the taxpayer. was not enroled in an educational institution in Canada that is a university, college or other institution providing courses at the post secondary school level nor certified by the Minister of Employment and Immigration as required in subparagraph 118.5(1)(a)(ii) of the Income Tax Act.
I hope we have been able to clarify Revenue Canada's position on the matter.
for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch