If you are an extreme procrastinator, and find yourself searching for a last minute fare to fly south during the upcoming Christmas season, relax. Don't call your travel agent in a panic. Call the Canada Revenue Agency instead. Apparently the CRA is able to come up with rock-bottom fare prices anytime in the year. We'll see how they do it in this two-part TaxBreak.

Northerners who have lived in the NWT or Nunavut for at least six months qualify to claim a travel deduction if they received a travel benefit from their employer. This travel benefit is reported in Box 32 of the T4 slip.

For this deduction, you claim the lower of three amounts - your Box 32 benefit, your trip expenses, or the "lowest return airfare ordinarily available, at the time of the trip was made..."

There is nothing ambiguous with the first two criteria. Unfortunately, the third criterion - "lowest return airfare ordinarily available, at the time the trip was made..." is controversial.

The CRA says it's the lowest regular airfare on the day the travel began and excludes promotional or discounted fares. More or less, that means it's the last-minute regular fare you pay at the counter before you board.

Since the travel deduction was introduced in 1987 - that's 21 years ago - I have viewed the "lowest return airfare..." as the full fare. The reason was simple. In those days, a last-minute counter ticket was the full fare. You could have pre-purchased a discounted fare then but that fare price was irrelevant because it was a pre-purchased ticket price (i.e., not a price you would have paid at the time of your trip).

That all changed on June 17, 2002 when Canadian North, a Northern-based carrier, introduced multi-tiered regular fares. For example, with this new system you could have paid $600, $850 or $1,150 for a regular-priced Yellowknife-Edmonton return ticket in 2002, depending on availability. Presumably the lower-priced regular fares sell first and force last-minute travellers into the higher-priced fares.

So now we have a problem. How do you find out the lowest available regular fare when there are multiple regular fares on a particular flight, without going up to the airline counter to ask at flight time?

The CRA seems to know. For 2006, their version of the lowest airfare for a Yellowknife-Edmonton return trip was $1,209 (when the full fare was about $1,510). Okay, I can live with $1,209 because that might be a reasonable average last-minute counter fare for 2006. That's before you realized the CRA also says the 2006 lowest airfares for Inuvik-Edmonton and Norman Wells-Edmonton were $1,176 and $1,145 respectively.

It gets worse. For 2007, CRA says the lowest airfares (i.e., the last-minute counter fares) were as follows: Yellowknife-Edmonton, $756; Norman Wells-Edmonton, $1,142 and Inuvik-Edmonton, $1,265.

These fares are the lowest-tier regular fares on Canadian North's 2007 fare grids. Translation: the CRA says at any time in 2007, you would have paid the lowest-tiered fare if you walked up to the airline counter and purchased a last-minute ticket. What's there to say - get real?

Where is the CRA getting their amounts from? Here's what a Tax Break reader said in an email to me this week: "I was told, when I called the Winnipeg Office, that they had tried to book a flight from Yellowknife to Edmonton on three separate days in 2007 and this was the highest figure that they were provided with".

Presumably the "three separate days" were during slow travel days during the non-peak travel seasons. Bottom line - data gathered on three out of 365 travel days doesn't give the CRA sufficient basis to apply the $756 amount (for Yellowknife-Edmonton).

Andy Wong, CGA, CFP, is a tax consultant at MacKay LLP, Chartered Accountants, in Yellowknife. He can be reached at: andrewwong@yel.mackayllp.ca.