2017-0731171E5 Deductibility of expenses

Principal Issues: Is a taxpayer gaining or producing income from a business when posting monetized videos to social media?

Position: Question of fact.

Reasons: The facts of every situation would need to be analyzed in order to determine if a taxpayer has a source of income.

Author: McCullagh, Melanie
Section: 9(1), 18(1)

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                                                                                                   2017-073117
                                                                                                   Melanie McCullagh
May 2, 2018

Dear XXXXXXXXXX:

Re: Deductibility of expenses

We are writing in response to your correspondence of October 14, 2017, concerning advertising revenue received by a taxpayer in respect of videos taken by an unmanned aerial vehicle (UAV). Specifically, you wish to know whether the monetizing of a video posted on social media constitutes a business and, if so, whether the expenses incurred to produce the video are deductible.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

As noted in the Canada Revenue Agency’s Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income, a business is an activity that an individual intends to carry on for a profit and there is evidence to support that intention. The existence of a source of income (in this case, a business) will depend on the taxpayer’s efforts and degree of involvement. Generally, if a taxpayer carries out an activity in a sufficiently commercial manner, the activity will likely be considered a source of income for purposes of the Act. Whether a particular activity, including monetizing a video posted to social media, constitutes a source of income is a question of fact that must be determined on a case-by-case basis. In these types of circumstances it is often necessary to determine whether a taxpayer is, in fact, carrying on a business or merely pursuing a personal endeavour. Where a personal or hobby element exists, the activity will be considered a source of income only if the activity is undertaken in a sufficiently commercial manner. Assuming a taxpayer does have a source of income from a business, reasonable expenses incurred by the taxpayer in the course of carrying on that business may be deductible.

We trust these comments will be helpful.

Yours truly,

Sandro D’Angelo, CPA, CMA
Acting Manager
Business Income and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate

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