Citation: 2010TCC418
Date: 20100813
Docket: 2010-34(IT)I
BETWEEN:
BRIAN G. SINCLAIR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
The Appellant has
appealed the reassessment of his 2004, 2005 and 2006 taxation years. The issue
in this appeal is whether the Appellant’s theatrical endeavours constitute a
source of income.
[2]
During the years under
appeal, the Appellant reported business income, expenses, business loss and
employment income as follows:
|
|
2004
|
2005
|
2006
|
|
Business Income
|
$ 723.50
|
$ 826.00
|
$ 1,015.00
|
|
Expenses
|
35,461.12
|
39,436.37
|
42,523.55
|
|
Business Loss
|
($34,737.62)
|
($38,610.37)
|
($41,508.55)
|
|
Employment
Income
|
$ 76,569
|
$ 79,899
|
$ 80,886
|
[3]
The Appellant stated
that he is an actor, playwright and producer. He took a three year acting
course from the National Theatre School of Canada. He graduated in 1970. After
his graduation, the Appellant worked with various groups as an actor but
sometime in the 1970’s he had to resort to another profession “to support his
acting”. This profession was teaching which the Appellant described as a
subsidy to support his acting endeavours.
[4]
During the years under
appeal, the Appellant was employed full-time as a teacher with the Simcoe
County District School Board where he taught Dramatic Arts and English.
[5]
The Appellant described
the various endeavours he undertook to further his acting, writing and
producing career.
(a) In 1997, he wrote a one person
play about the life of Vincent van Gogh which he was going to produce but the
actor who was to play van Gogh walked out at the last minute. The Appellant
“revived his own acting” and played the show in Buffalo.
He earned $2,000. He intended to take the play on the road but, for reasons not
explained to the court, was not able to carry his plans to fruition.
(b) In 1999, he created a show which he
called “Love Letters”. The actress who performed with him became ill and the
show has not been performed since. He was not sure how much money he made from
this show.
(c) In 2001, he wrote a three act play
with respect to the 1916 Irish Easter Rebellion. He made $400 from this play.
He found that he could not pack all the equipment into his trailer which was
needed to take this play on the road. Therefore, he produced a sound record of
the play on a CD. Fifty copies of this CD were sold but the Appellant received
nothing from the sales. He now hopes that as the 100th anniversary
of this rebellion approaches, there will be a demand for the CD from the Irish
diaspora.
(d) He has three scripts at home which
he has mailed to every theatre in the United States and Canada but, as yet, he has not received any positive
responses.
(e) In 2003 or 2004, he started to
write plays about Ernest Hemmingway. He performed in these plays in Key West, Cuba and Spain. He received no
money for his performance in Key
West but received lots of
publicity; in Spain, his expenses of approximately $3,000 were
paid for him.
[6]
The Appellant explained
that, during the period under appeal, he did not expect to earn income from his
endeavours as that was the time during which he was writing his plays on Ernest
Hemmingway. He did everything necessary to research, develop and create plays
of high artistic calibre that would garner future income.
[7]
Some of the expenses
claimed by the Appellant were for advertising, interest on his lines of credit,
maintenance and repairs, meals and entertainment, motor vehicle, rent and
storage and travel. In 2004, he purchased a new vehicle which was used to
transport the props he used in his play. He rented a theatre in Key West so that he could perform his play.
[8]
The losses claimed by
the Appellant are deductible only if the Appellant had a source of income. The
Supreme Court of Canada, in Stewart v. R., 2002 SCC 46,
summarized the test to be used to determine whether there is a source of
income. At paragraph 60 it stated:
In summary,
the issue of whether or not a taxpayer has a source of income is to be
determined by looking at the commerciality of the activity in question. Where
the activity contains no personal element and is clearly commercial, no further
inquiry is necessary. Where the activity could be classified as a personal
pursuit, then it must be determined whether or not the activity is being
carried on in a sufficiently commercial manner to constitute a source of
income.
[9]
If the activity is clearly
commercial in nature, there is no need to analyze the taxpayer’s business
decisions[1].
In such cases, a source of income automatically exists. However, to determine
if a source of income exists, it is not enough that the taxpayer has a
subjective intent to make a profit. The determination is made by looking at a
variety of objective factors. As stated at paragraph 54 of Stewart:
This requires
the taxpayer to establish that his or her predominant intention is to make a
profit from the activity and that the activity has been carried out in
accordance with objective standards of businesslike behaviour.
[10]
In this case, there was no
commerciality or businesslike behaviour. The evidence showed that, when the
Appellant traveled to Key West to perform his play on Ernest Hemingway, he was
donating his time. He received no money for his endeavours. The ticket sales
for his performances benefited the Key West Art & Historical Society. When
counsel for the Respondent questioned the Appellant about this, he stated that
“he would love to charge, but there is no one who would pay me”. However, the
Appellant paid for a technician to accompany him to Key West; he paid for all
of the technician’s expenses and for the meal expenses of people who assisted
him in Key West. He stated that anytime he considered himself to be
at work, he claimed the expenses associated with that time.
[11]
Although the Appellant received no
money from his performances in Key West, he continued to attend the Hemingway Festivals and
incur the expenses associated with his travel and his performances.
[12]
During cross examination, it
became apparent that the Appellant did not earn any income from his artistic
pursuits in 2004, 2005 and 2006. All amounts reported as income were expenses
that were paid for him i.e., in-kind receipts.
[13]
At the audit stage of this appeal,
the Appellant prepared a Business Plan. He projected that, in 2008, he would
earn $10,000 and he would have expenses of $8,641. He stated that his plans did
not come to fruition but he did have the best of intentions.
[14]
There was a total absence of businesslike
conduct that one would expect if this were a profit-seeking endeavour. The
Appellant has not demonstrated that he had a source of income. In fact, he has
not shown that he even had the subjective intention to make a profit. He has
demonstrated that he is more concerned with doing research than he is with
selling a product.
[15]
The appeal is dismissed.
Signed at Halifax, Nova Scotia, this 13th
day of August 2010.
“V.A. Miller”
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