Preston – Tax Court of Canada finds that the taxpayer’s substantial expenses in trying to launch his daughter’s singing career were deductible

The taxpayer entered into a personal management contract with his daughter (Chantal), an aspiring singer/ songwriter, under which he would incur promotional expenses up front and receive a 5% or 10% commission if Chantal achieved a major milestone, such as signing with a major record label. CRA disallowed his related business deductions of $52,046 for his 2017 taxation year on the basis that he was not engaged in the business of artist management.

In allowing the appeal, Wong J indicated that, although there was clearly a personal element involved, the taxpayer nonetheless had established the presence of an activity carried on in a sufficiently commercial manner. For instance, Chantal had produced an album in Ontario from which one song received radio play and produced some royalties from SOCAN, a second album was recorded in Nashville in 2017 (though it had not received radio play), Chantal eventually signed a licence agreement with a Toronto record label in 2019 and, meantime, the taxpayer had engaged an accountant with an understanding of the music industry.

Neal Armstrong. Summary of Preston v. The King, 2023 TCC 136 under s. 3(a) – business source.