Originally published on March 20, 2003


Our courts have had to deal with the issue of deductible expenses since the inception of the Income Tax Act.

Part of the problem is that the act provides a subjective definition of what business and property owners can write off.

Paragraph 18(1)(a) states that any non-capital expense "incurred for the purpose of gaining or producing income" is deductible. Section 67 weighs in on this matter by allowing deductible expenses only if they are "reasonable in the circumstances."

So if you spend money on something that helps generate business income and if the expenditure is reasonable, given the circumstances, then you can write it off. What's so complicated about that?

As usual, the complications arise from differing interpretations of the fact.  Here are a few of my favourites:


In Riedle Brewery Ltd vs. Minister of National Revenue (MNR), a brewery's expenses in treating drinkers to boost sales in its own and other hotels were held deductible.

In Col. Sanders Kentucky Fried Chicken Ltd. vs. MNR, the cost of white suits for the president of KFC was held to be not deductible as an advertising expense because the suits also held a personal purpose.


In Stewart vs. MNR, the cost of maintaining and training Airedale dogs purportedly for use in commercial advertising to earn income at a future date by an advertising display businessperson was held to be too remote and the expense not deductible.

In Zeitz vs. The Queen, expenses associated with having a cat and dog to keep wild animals away from blueberries on the taxpayer's 6.3-acre farm were deductible.

Automobile expenses

Automobile expenses incurred by a crippled employee to get to work or to carry on the duties of employment were not deductible in Butler vs. MNR. However, in No. 302 vs. MNR, car expenses were allowed to an entertainer who derived his income from independent contracts, when he was able to show that only by using the car was he able to keep all his income-earning engagements.

A criminal lawyer who used his car to recruit clients at various courthouses and police stations during business hours and on evenings and weekends was allowed to deduct as much as 80 percent of his car expenses in Robitaille vs. The Queen.




Deduction of damages paid by a farmer as a result of an automobile collision while on a business trip was disallowed. The damages were found to be an outlay not incurred for the purpose of producing income in Davis vs. MNR.

Entertainment expenses

In Roebuch vs. MNR, entertainment expenses incurred by a lawyer on the occasion of his daughter's Bat Mitzvah celebrations were disallowed. Although some 85 percent of the guests were clients of the taxpayer and his partner, the cost was ruled to be purely a personal expense.


In Miller vs. MNR, a loss incurred by a farmer through thefts by his partner in a separate trucking business was held to be not deductible from farm income. The loss was denied in the farm business, but would likely have been allowed in the trucking business.

Gambling expenses

In Wright vs. MNR, despite the taxpayer's attempts to become a professional gambler, he had no reasonable expectation of profit and so his gambling activities did not constitute a business. Submitted expenses were disallowed.

Undocumented expenses

In No. 348 vs. MNR, entertainment expenses of a fur retail company were disallowed for lack of evidence. Its president, when heard as a witness, explained that his time was too valuable to waste in keeping track of expenses.

Travelling expenses

Travelling expenses incurred by a retiree in looking after an investment were not deductible because they were not incurred in the course of carrying on his business in Benjamin vs. MNR.

In Hleck et al vs. The Queen, the court said that wives' presence at conventions to promote an atmosphere of friendship and goodwill is an accepted method of developing business. A lawyer was able to deduct the cost of his wife's airline ticket to accompany him to law association conferences in Florida.

All of these taxpayers went to court believing they had deductible business expenses. Some won, some lost. Deductible expenses will continue to be litigated in our tax courts. We can learn the following:

You must have a documented receipt.

The expense must produce income from your business.

The expense must be reasonable.

The expense must not have a personal purpose.


Allyn Tastad, chartered professional accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at or website All data and information provided is for informational purposes only. Readers are cautioned that laws and regulations are subject to change. Consult your accountant for current professional advice tailored to your situation.