How To Deduct Taxes Withs While Being A Nice ...2015-08-27 - Gift Card Balance

Cherry Chan Your Real Estate Accountant

Cherry Chan is your Real Estate Accountant. Since 2003 she''s been providing tax tips for investors and realtors and helps them incorporate their portfolios.

How to Deduct Taxes with Gift Cards While Being a Nice Landlord - Real Estate Tax Tips

Erwin and I believe that if you treat people nice, most of the time, they will also treat you nice as well. Whenever we visit our tenants, we always try to buy some treats or gift certificates for them to enjoy. Most of our tenants appreciate this gesture. And hopefully they will take good care […]

Whenever we visit our tenants, we always try to buy some treats or gift certificates for them to enjoy. Most of our tenants appreciate this gesture. And hopefully they will take good care of our houses.
As a landlord and taxpayer, you may wonder if these gift cards are tax deductible or not?
You may then wonder if you can deduct 100% of your meals expenses if you purchase restaurant gift cards entirely for the enjoyment of your tenants without any of your participation?
A taxpayer in 2006 had already brought this scenario to court (The Queen v. Stapley, 2006 DTC 6075). The taxpayer was a self employed real estate agent. The taxpayer often bought gift certificates for food and beverages and tickets of various sporting events to his clients. He did not attend the dinners and the sporting events and hence he deducted 100% of the costs.
The judge reluctantly ruled in favour of the Minister. This means that all the gift certificates issued from a restaurant would be 50% deductible, not 100%.
Furthermore, in 2014, Judicial and CRA Interpretations of Canada Tax Law and Transactional Implication stated that if the gift certificates are issued by the supermarket, a permanent establishment that is primarily engaged in selling food and beverages, section 67.1(1) applies and only 50% of the expenses incurred are deductible.
Say, you are buying a Home Depot gift card, even if you have a home depot promo code, for the purpose of earning the property income, since Home Depot is not an establishment that is primarily engaged in selling food and beverages, you should be able to claim the expenses 100% deductions.
Hi Cherry,
Are Ikea gift cards 100% deductible? They can be used for Ikea food court. Any other similar places ideas?
Julia, the question to CRA was that if grocery store gift card is fully deductible or only 50% deductible, because the goods supplied by a grocery store is primary food, hence CRA ruled that gift cards from grocery store is only 50% deductible.
Using the same logic, IKEA is primarily supplying furniture, not food. I would say that the gift cards is 100% deductible, provided that the gift cards are used directly to earn the income. Hope this helps.
What about Tim Hortons and Starbucks gift cards? My accountant states that if you can buy mugs and other non-food merchandise this can be 100% deducted. How would CRA look at that?
If it is non-food merchandise, it is deductible but you will have to make sure the receipt says so. A general gift card would not work unfortunately, despite the fact that you can buy non-food merchandise with a general gift card.
One way to get around this while still giving a gift certificate intended for your tenant to enjoy a meal is to buy a gift card to a mall with several restaurants. For example Yorkdale or Eaton Centre. Let your tenants know you would like to have them enjoy a meal at the Cheesecake Factory or Pickle Barrel at Yorkdale…
Fantastic info as always. Is there any difference to the rule of gifting if the real estate is owned under a corporation vs personal?
Absolutely. There’re complicated rules in terms of gifting and generally it is considered as a deemed disposition at fair market value.