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Overturned Reassessment Denying Business Expenses

Case Background:

The taxpayer was a musician who performed with his band which was formed in early 2010. Since he incurred significant expenses including: rehearsal space, advertising, and musical supplies; he claimed these as business expenses.

He was audited by the Canada Revenue Agency (CRA). After his reassessment was completed, the CRA disallowed all the business’ expenses that he had claimed. The reason for this decision was that the CRA claimed that the Taxpayer was not carrying on business during those years.

The taxpayer engaged Farber Tax Solutions to contest these reassessments and to have the taxpayer’s endeavors classified as a business.

The Farber Tax Solutions Approach:

Farber Tax Solutions submitted a Notice of Objection to the CRA against the reassessments.

Once the objection was assigned to a CRA Appeals Officer, our representatives prepared submissions contesting the findings regarding the taxpayer not being considered in business, including an analysis of the taxpayer’s expenses.

Since the taxpayer was a musician, it was important to clarify the steps he had to take to turn his endeavors into a successful business. Each of these steps were raised and explained to the Appeals Officer, along with properly linking the expenses incurred by the business.

The Result:

Based upon our representation, the CRA overturned the reassessment on the basis that the taxpayer was, in fact, operating a business during the audited period, and they were therefore entitled to significant business expenses that had been rightfully claimed.