Revenue Canada Taxation
Head Office
XXXX
C. Tremblay (613)957-2183.
NOV 22 1988
Dear Sirs:
This is in reply to your letter of September 30, 1988, requesting our opinion on the deductibility of contributions of labour and materials to the XXXX by various construction Companies. XXXX Our Comments In our opinion, the contributing construction firms will not be prevented by paragraph 18(1)(a) of the Income Tax Act from deducting the labour and material expended on the construction of XXXXXXXX as advertising and promotional expenses. Provided the expenses are current rather than capital in nature, are not personal or living expenses and are reasonable in the circumstances, the expenditures will be considered part of the income-earning process; indeed, any resulting income, either directly or indirectly will be considered taxable.
With respect to your suggestion that the XXXX issue a letter signed by the treasurer and the construction supervisor verifying the contribution we note that a contributor's deductions would not exceed its costs of the relevant materials and labour contributed.
As with any other deduction, the onus is on the taxpayer to prove that it has actually incurred all of the expenditures or disbursements for which it seeks a deduction.
We trust our comments will be of assistance.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch