Alan R Needham v. Minister of National Revenue, [1974] CTC 2078

The Assistant Chairman:—This is the appeal of Alan R Needham from income tax assessments in respect of the appellant’s 1969 and 1970 taxation years.

The appellant, who is 43 years of age, was employed by the Government of Canada as a management consultant. He reported income from employment of $17,461.66 in 1969 and $19,398.85 in 1970. The respondent, who admits that the appellant is a writer, claims that his efforts in that regard are in the nature of a hobby or avocation, and he consequently disallowed losses of $518.50 in 1969 and $900 in 1970 which were claimed by the appellant as a result of his activities as a writer and deducted from his other source of income in those years.

The point to be determined in this appeal is whether the appellant in his activities as a writer was exercising a hobby or whether he was engaged in writing professionally for profit or with a reasonable ex- pectation of profit. The facts of this appeal indicate that the appellant started to write in 1956 for his own amusement and did not until 1969 claim any expenses incurred in connection with his writing.

The money he received for his material was considered a profit. In 1968 the appellant decided to write professionally and in order to have a study in which he might have a library and a place to file his notes which were necessary in writing his material, he purchased a house for the purpose and in 1969 and 1970 claimed as rental expenses $319 and $261 respectively representing approximately 10% of the average cost of maintenance. The expenses claimed in respect of the appellant’s activities as a writer included automobile, stationery supplies, telephone, light and water and amounted in aggregate to $968.50 in 1969 and $1,298.75 in 1970.

In 1969 the appellant wrote approximately a dozen short stories and sold six of them as well as a few poems—earning an income of $450. In 1970 the appellant decided to diversify his writings and produced a story, a poem, three short essays and a feature article entitled “Journey Home” which he was asked to do by the editors of Globe Magazine as part of a series of articles the magazine was running. In 1970 the appellant’s revenue from writing was $398.75. However, in 1970 the appellant had also written an additional story, two essays and one major article which were sold in the following year.

In 1971 the Globe and Mail ceased publication of its magazine and the appellant was forced to seek new outlets for his material which he found as a casual columnist for the Ottawa Citizen and the Globe and Mail for which he did book reviews as well as other forms of writing—permitting a better balance of his literary output.

The appellant is also working on a play and a novel which take more time to produce but which are also more remunerative when sold and are subject to spinoffs. Three of the appellant’s stories were rebroadcast on three separate occasions for which he received royalties. Income from that source would, of course, be taxable. Professional writing differs substantially from other businesses and the criteria usually used to determine whether a certain activity is a business are not easily applicable to a writer. In my view what the appellant has actually produced and sold in the field of writing substantiating his declared intention of being a professional writer is a valid basis for determining whether the appellant is merely writing for personal pleasure or whether he is writing for profit.

I am satisfied from the facts that in the years pertinent to this appeal the appellant was writing professionally and oriented his writing so as to realize a greater revenue. Perhaps more than in any other business, considerably more time is required before a freelance writer is sufficiently well known to have the greater part of his writings accepted and the appellant has succeeded in having 80% of his work accepted by reputable publishers. I can see no reason why the appellant could not expect to make a. profit from the material he wrote in 1969 and 1970, some of which might be published only in subsequent years.

lt also appears to me that the expenditures claimed in respect of the appellant’s writings are not unreasonable. A study, a library, filing cabinets, stationery etc are necessary tools of any person engaged in professional writing. In 1970 in order to write the feature article for Globe Magazine entitled “Journey Home” the appellant travelled to England to gather the necessary material and claimed expenses of $484. Such expenses are not to my mind exorbitant and, had Globe Magazine not been phased out, the appellant claimed that more revenue would have been derived from the material so gathered in the form of additional essays and short stories which would have been published in the Globe Magazine.

I conclude therefore that in the 1969 and 1970 taxation years the appellant was writing professionally, that there existed a reasonable expectation of making a profit from his writings, that the expenditures incurred in order to earn income from his activities as a writer were reasonable and that the consequential business loss of $518.50 and $900 in 1969 and 1970 respectively should be deducted from the appellant’s other income in those years.

The appeal is allowed.

Appeal allowed.