21 September 1994 External T.I. 9419115 - EXPENSES AUTHOR

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

	Expenses deductible by author in respect of a book to be 	published

Position TAKEN:

To be deductible, expenditure must be incurred for purpose of gaining or producing income. Also there must be a reasonable expectation of profit.

Reasons FOR POSITION TAKEN:

Routine

		5-941911
XXXXXXXXXX		M. Shea-DesRosiers

September 21, 1994

Dear Sir:

Re: Deductibility of Expenses in Writing a Book

This is in reply to your letter of July 17, 1994 wherein you enquire as to the expenses you may be entitled to deduct in respect of a book you intend to publish.

In order for expenses to be deductible, the outlay or expenditure must be made or incurred for the purpose of gaining or producing income from a business. In addition in order that the expenses relating to the writing activities may qualify for a deduction there must be a reasonable expectation of profit. Interpretation Bulletin IT-504R at paragraph 3 describes some of the more common factors which will be considered by the Department in determining whether or not a writer has a reasonable expectation of profit. A copy of said Bulletin is enclosed for your information.

Where an author's writing activities do constitute a business, the author will be entitled to claim all reasonable expenses incurred in earning the income from that business. Such expenses could include that portion of the household maintenance costs (e.g. heat, taxes, insurance, etc.) related to the space used solely for the writing activities. Such apportionment of a capital nature (e.g. desk, reference books, computer, etc.) cannot be expended but a deduction in respect of their cost, called capital cost allowance, is permitted for tax purposes.

Conversely, where the activity or undertaking has no reasonable expectation of producing profits, a business would not be considered to have been carried on and any losses that resulted, that is the excess of expenses over revenues, would not be deductible for income tax purposes.

We also enclose for your information a copy of the " Business and Professional Income Tax Guide" which may be of assistance to you. For example, at page 17, you will find information on whether the cost of "Computers and other equipment" either bought or leased can be deducted.

Should you require further assistance, you should contact the Ottawa District Office, 360 Lisgar Street, Ottawa, Ontario K1A 0L9 (telephone 941-2019).

We trust the above information will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch