Award tickets have value – there’s the cost of the taxes and fees and the value of the points redeemed. Wouldn’t it be great if you could apply the value of your Aeroplan ticket as a tax deduction? Canadian law, nor the CRA, provides much guidance on this matter. However, a 2010 case at the Tax Court of Canada, Johnson v Canada, provides some guidance on how award redemptions may be used as a deduction on taxes.
I am not a lawyer, nor am I a tax professional. Always consult a licensed attorney and/or another licensed tax professional. This is not legal advice, and shall not be considered as such.
In Jonhson v Canada, Johnson (the “Appellant”) flew to Chicago from Thunder Bay to obtain medical treatment. He redeemed 76,000 Aeroplan miles and $220 in taxes and fees for the ticket. At that time, s. 118.2 of the Income Tax Act (the “Act”) allowed for a deduction for travel expenses for medical treatment.
The Appellant submitted the value of a present-day cash ticket as a deduction for his 2007 taxes. The CRA only allowed the $220 taxes and surcharges, but denied the other portion of the deduction, claiming that Aeroplan points do not constitute as good consideration (payment), and therefore can’t be used as a deduction.
The Court was faced with two issues:
(1) Are Aeroplan points good consideration, meaning they have value and are covered under the Act?
(2) If the above is answered in the affirmative, what is the value of those points?
For the issue of whether Aeroplan points are good consideration, the Court found that, among other things, Aeroplan points can be redeemed for a set price for goods/services, and therefore, are good consideration.
As the first issue was answered in the affirmative, the Court then moved to assess the value of the points redeemed. Unfortunately, because of a lack of submissions by the Respondent, the Court didn’t cover the issue of how to value the points. In his submissions, the Appellant declared the value of the points as $2,280, the cost of the paid economy ticket (presumably full-fare). As the CRA allowed a $220 deduction in his initial claim, the Court granted $2,060 for the value of the Aeroplan points. The Court didn’t really cover their analysis of the value of the Aeroplan points, so although this case is precedent setting for being able to deduct the value of an Aeroplan ticket, it is not terribly persuasive for how to calculate the value of those points. Should we use the buying cost of an Aeroplan point? The equivalent cash cost?
Although this case favours the consumer, there isn’t much caselaw in the field. Whether or not we can deduct the value of award tickets for a variety of reasons looks favourable, however, I suspect more case law will have to be built to better answer this question.