Claiming Musical Instrument Costs
By Joel Secter
Last month, we wrote about how businesses can take advantage of the capital cost allowance (CCA) to depreciate eligible works of art by Canadian artists. The article prompted a response from musicians who requested that we clarify whether they could claim CCA for musical instruments. It just so happens that the Tax Court of Canada heard an appeal for such a claim in the fall of 2013 in Dubois, R. v. The Queen.[1]
In Dubois, the taxpayer was a Quebec company in the real estate business. The company had acquired three violins and two bows for a total of more than $1.9 million. The violins and one of the bows were known to have been made in the early 1700s and mid-1800s, but the fabrication date of the other bow was unknown. All of the musical instruments were made available to talented musicians through one of the company’s subsidiaries. On this basis, the company claimed CCA in the amounts of $55,120, $48,511 and $53,085 for the taxation years 2002, 2003 and 2004 respectively.
Whether the appellant could claim CCA in Dubois turned on the interpretation of paragraph 1102(1)(e) of the regulations to the Income Tax Act (the Regulations), the same provision that allows businesses to deduct eligible works of art by Canadian artists. However, under paragraph 1102(1)(e), antiques more than 100 years old are not depreciable. The appellant in Dubois argued that the Regulations referred to decorative objects and not objects that are used, as was the case with the musical instruments in question. The Court did not agree.
Justice Jorré of the Tax Court wrote, “I do not see any reason to conclude that the words ‘any other antique object’ or ‘tout autre objet d’époque’ should be given any meaning other than their ordinary and very broad meaning.” Accordingly, he concluded that, aside from the violin bow whose fabrication date was unknown, the musical instruments were “antique objects” caught by paragraph 1102(1)(e) and therefore could not be depreciated. While the outcome was not wholly favorable for the appellant in Dubois, the case confirms that musical instruments may be eligible for CCA in certain circumstances.
It also bears repeating that Dubois dealt with a taxpayer who was a company. While self-employed artists may also claim CCA on musical instruments they need in order to perform, employed musicians can only claim a deduction under subsection 8(1)(p) of the Income Tax Act for their instruments if they own them and they are required, as a term of their employment, to provide them for a period in the year. Finally, if eligible, a deduction for a musical instrument by an employed musician cannot exceed the musician’s income for the year after allowable employment expenses are deducted, such as the cost of maintenance and insurance for their instruments.
[1] 2009-3024(IT)G, 2013 CCI 409, 2013 TCC 409.