CRA will want to know about Taylor Swift ticket profit

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Taylor Swift wrapped up her 149-show, 20-month Eras Tour with a sold-out live performance in entrance of 60,000 followers in Vancouver on Sunday night time. And, whereas an estimated 10 million fortunate followers globally obtained to attend certainly one of her reveals, numerous others benefited from reselling their coveted tickets, for income within the 1000’s of {dollars}.

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For instance, a relative advised me that he obtained a pre-sale code to purchase tickets, with the intention of taking his fiancée, however when he came upon how a lot he might get for his three floor-level seats to one of many six Toronto reveals, he determined to promote the tickets on-line. He cleared over $10,000 in revenue – sufficient to pay for the band at his wedding ceremony reception subsequent summer season. Equally, a Toronto good friend was in a position to safe tickets within the pre-sale to attend one of many Vancouver reveals together with his two grownup daughters, however after researching the price of flights and discovering exorbitant lodge charges for the weekend, determined to resell the tickets on-line, pocketing 1000’s in revenue.

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Once I nonchalantly reminded every of them to not neglect to report their ticket resale income on their 2024 tax returns, they every appeared considerably shocked. Which begs the query: Is the revenue from the sale of live performance tickets actually taxable, and, if that’s the case, how ought to it’s reported in your Canadian tax return?

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I’d counsel that, for most individuals, aside from skilled ticket-resellers who make it their enterprise to purchase and promote tickets at a revenue, live performance tickets are capital property, which means that the revenue from a resale of tickets can be handled as a capital acquire. That’s, the proceeds acquired from the sale, much less the price of the tickets (your adjusted price base or ACB) can be a capital acquire.

For people with lower than $250,000 of annual capital positive factors in a yr, the acquire can be 50 per cent taxable, which means that even somebody within the prime tax bracket of 53 per cent in Ontario or British Columbia would pay a most prime charge of about 26 per cent capital positive factors tax on their Swift ticket income. (Beneath proposed laws, which was to be efficient June 25, 2024, in case your positive factors are over $250,000 yearly, the inclusion charge on capital positive factors was elevated to 66.67 per cent, which means that the highest capital positive factors tax charge can be nearer to 35 per cent.)

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However, there are literally some particular guidelines for the sale of what’s often called “personal-use property” (PUP). PUP refers to objects that you simply personal primarily in your or your loved ones’s private use or enjoyment, equivalent to private and home items, for instance, furnishings, cars, boats, a cottage, and different related property. One might make the case that live performance tickets are PUP, since they’re for the purchaser’s private use.

Beneath the PUP guidelines, if the quantity you paid (your ACB) is lower than $1,000, it’s deemed to be $1,000 for tax functions. Equally, if the money you obtain if you promote PUP is lower than $1,000, your proceeds from the sale for tax functions are additionally handled as being $1,000. The sensible results of these guidelines is that if each the ACB and the money you obtain in your PUP are each beneath $1,000, you don’t need to report any acquire or loss in your tax return. Notice that beneath the Revenue Tax Act, you can’t have a capital loss from the sale of most PUP.

Let’s say Katy purchased two Swift tickets throughout the fan pre-sale for $250 every or $500 for the pair. She was in a position to resell them on StubHub for $5,500 complete, yielding a $5,000 revenue. For tax functions, the ACB of her tickets can be deemed to be $1,000. Katy will notice a capital acquire for tax functions of $4,500. Whereas it could be tempting to say that every ticket is its personal PUP and thus ought to have its personal ACB of $1,000, particular guidelines apply the place the PUP you personal is taken into account to be a part of a set, and also you eliminate the set to 1 individual. If these guidelines apply, Katy’s ACB of the 2 tickets collectively are deemed to be $1,000.

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A gaggle of things is handled as a set the place the objects would ordinarily be disposed of collectively, and are usually considered belonging collectively. Usually their worth as a set is bigger than the whole worth of the person items. The set is deemed to be one single PUP, and the $1,000 minimal price and proceeds might be shared by all the properties within the set. This rule is in place to forestall somebody from promoting components of a set in a sequence of transactions to the identical purchaser, after which utilizing the $1,000 minimal price for every transaction to cut back the general acquire for tax functions.

Now, let’s say you acquire your Swift tickets with no intention of ever going to the live performance. In case your objective from day one was to revenue from the ticket resale, then your acquire is more likely to be thought-about absolutely taxable self-employment enterprise revenue. Whereas it could be arduous for the Canada Revenue Agency (CRA) to find out your unique intent retroactively, the company could look to see how quickly you listed the tickets for resale after buy (an hour later? a day? every week?).

You might be tempted to easily not report your Swift ticket resale in your return, maybe since you consider that your Swift revenue is akin to a tax-free windfall, like a lottery win. In the event you’re incorrect, the penalty for unreported revenue might be 10 per cent of the revenue you did not report if that is the second time you didn’t report revenue within the present and prior three tax years. And, that’s along with the tax on the acquire, and non-deductible arrears curiosity.

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Questioning how the CRA would possibly catch you? In recent times, the CRA has been recognized to invoke the “unnamed individuals” rule within the Tax Act, which might require a third-party equivalent to a ticket-resale or fee facilitation enterprise to offer data or any paperwork regarding unnamed individuals to the CRA. To take action, nevertheless, the CRA should first acquire permission from a decide.

Whereas some readers could accuse me of being casually merciless within the identify of being sincere, should you fail to report your Taylor Swift income in your 2024 tax return subsequent spring, and also you get reassessed for unreported revenue, you can be in for a merciless summer season.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

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