Costanzo v. R. - TCC: Fees paid to “associate musicians” not deductible

http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/230493/index.do

Costanzo v. The Queen (April 26, 2017 – 2017 TCC 58, Favreau J.).

Précis:  Mr. Costanzo was a musician.  After a number of smaller items were settled, the only remaining issue in this appeal was the deduction of amounts paid to “associate musicians” who were very close friends of Mr. Costanzo.  The Court found that Mr. Costanzo had not proven the payment of the amounts in question and dismissed the appeal.  There was no order as to costs since this was an informal procedure appeal.

Decision:  After some smaller amounts were settled the only remaining items at issue in this appeal were fees paid to “associate musicians”:

[4]             As a result of the concessions referred to above, the only issue of this appeal is with respect to the so-called associate musician fees. The said fees are alleged to have been paid to Ms. Amy Todd and Mr. Scott McManus for musical services provided to the appellant in the following amounts for the 2008 to 2011 years:

The Court found that Mr. Costanzo had not met the onus of demonstrating that such payments were in fact made or were reasonable under the circumstances:

[23]        Mr. Costanzo has been very vague as to the nature of the services provided by his friends. Concerning the services provided by Mr. McManus, Mr. Costanzo said that he helped him in mixing sound track and that the amounts paid to him were well below the fair market value of the services that he received in exchange. Mr. McManus did not testify at the hearing. Concerning the services provided by Ms. Todd, Mr. Costanzo said that he used her as a sounding board for the type of music that is hot and cool. She testified at the hearing but her testimony was also very vague and indecisive. She has no records of telephone calls or work performed for Mr. Costanzo and she did not have a clue on the value of the services she rendered to Mr. Costanzo. She did not know how much money she received from Mr. Costanzo and she did not report the amounts received in her income tax returns for the years in which she was paid. She reported the fees received only in 2017 at the request of Mr. Costanzo’s accountant, based on the information provided by Mr. Costanzo.

[24]        Based on the foregoing reasons, I am not satisfied that, even if the expenses were in fact incurred as stated by the appellant, they were incurred for the purposes of earning income as set out in paragraph 18(1)(a) of the Act. The vague generalities that were presented as evidence are not adequate to discharge the burden of proof that the appellant has to meet.

[25]        Furthermore, the associate musician fees claimed by the appellant were not reasonable in the circumstances.

As a consequence the appeal was dismissed.  There was no order as to costs since this was an informal procedure appeal.