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Golf Haters: 1 Canada Revenue Agency: 0

Employees routinely pay tax to the Canada Revenue Agency in relation to benefits received as an employee. Rarely, it seems, an employee is able to escape the burden of the Income Tax Act in relation to such a benefit.
One such person is Henry Rachfalowski, who triumphed in his battle against the CRA. Mr. Rachfalowski had been taxed for a perquisite of employment but fought back and, after taking his case to the Tax Court of Canada, succeeded.
Mr. Rachfalowski’s story begins when he was hired as a Vice President by Canada Life Financial Corp. in Ontario. As part of his employment, his employer paid for a membership at the Barrie Golf Club. It paid the initiation fee of $5,000 and the annual fees of $2,047 each season. 
Many executives would consider this to be quite an attractive perquisite. Golf, however, is one of those things in life which seem to deeply divide the population. Either you love it or you detest it. 
Mr. Rachfalowski fell in the latter category. He tried to decline the golf membership, to no avail. His employer told him that to decline the membership would draw attention to him and that he would look like a maverick or a rebel.
He asked to be provided with the cash equivalent of the golf membership or to have its value put towards some recreational activities of his choice. Canada Life insisted on the golf membership.
Mr. Rachfalowski did try playing golf a few times but gave it up because he was such a poor player. He used the club occasionally to entertain clients.
In 2002, an assessment was made pursuant to the Income Tax Act, the result of which was that the value of the golf membership was included in his income for tax purposes. He appealed that assessment to the Tax Court of Canada.
His appeal was based on his position that the golf membership was for the benefit of his employer, that nothing of value had been conferred upon him, and that a golf membership for someone who hates golf is not a benefit.
The Tax Court of Canada sided with Mr. Rachfalowski, deleting the golf fees from his income. The Court started with the statement that “this relatively small case raises a difficult and important question of principle that affects the manner in which ‘benefits’ are taxed where they … are provided whether the employee wants them or not.” 
The Court confirmed that, to be taxable, there must be a benefit, it must be received or enjoyed by the taxpayer, and it must have some value. 
The question to be asked is, in what circumstances is something imposed by the employer as part of the employment package truly a benefit to the employee? The Court recognized the difficulty of answering this question in the abstract, stating “sometimes it is, and sometimes it is not. It all depends.”
The Court accepted Mr. Rachfalowski’s assertion that he did not want the golf membership and had been rebuffed in his attempts to decline it. It resorted to the practical question, “just what did the employee get out of the alleged benefit that ought to increase his or her income?”
The Court inferred that Canada Life wanted its senior executives to belong to a golf club. It “enhanced the company’s image and provided a place for its executives to entertain clients”. Overall, the Court concluded that the membership in the golf club was primarily for the benefit of Canada Life. It was, at most, of minimal benefit to Mr. Rachfalowski.
So when the CRA comes knocking on your door to tell you you’re being taxed in relation to a perquisite of employment, ask yourself whether the item in question truly was a benefit to you. If it wasn’t, you can use the inspiration of Henry Rachfalowski’s case to get you started on your appeal.
Robert Smithson is a partner at Pushor Mitchell LLP in Kelowna practicing exclusively in the area of labour and employment law. For more information about his practice, log on to