An organization, such as a club, society or association, that is established and managed exclusively for non-profit purposes, is generally exempt from income tax if no portion of its income is payable or otherwise made available to a proprietor, member or shareholder, unless the proprietor, member or shareholder is a club, society or association whose main object is the promotion of amateur athletics in Canada. Such an organization may nonetheless be required to file form TP-997.1-V, Information Return for Tax-Exempt Entities. For more information, see Exemption From Filing the Trust Income Tax Return.
If the main purpose of the organization is to provide dining, recreational or sports facilities to its members, a trust is considered to have been created with respect to the organization's property. This trust may have to file an income tax return. If this is the case, only the following amounts should be included in the calculation of the trust's income:
- income and losses derived from the organization's property;
- capital gains and losses from property that was not used exclusively and directly in the pursuit of the organization's main objective.
Such a trust is entitled to a deduction of $2,000 in the calculation of its taxable income (line 94 of the Trust Income Tax Return (TP-646-V)).