Re: Anyone receiving royalty payments?
 

Wouldn't an audit potentially find out that said desk and computer only exist so that taxes could be avoided fraudulently?

Re: Anyone receiving royalty payments?
 

How about if he called himself an inventor? That's a bit like writing.

The serious point being that it is difficult to audit creative activity. As long as the creative person has the minimum equipment for their craft, (which in most cases won't be more than a pencil and a piece of paper) it isn't really possible to say their business has ended. I don't know how tax offices treat this problem, or if they try to.

Re: Anyone receiving royalty payments?
 

Yes. Not everybody is completely honest when they fill out their tax returns. The chances of being audited out of the blue are small.

I don`t mind people being aggressive in their claims for deductions but making things up is going too far. Yet people still do it. And some get caught.

On the basis of reasonableness. In an audit the CRA might want to see some evidence of activity. The widget inventor could say that they spent hours each day on new designs but, so far, have not been successful. Also that they shredded all their drawings and notes each day to ensure that competitors did not steal them.

It is then up to the auditor to decide wither the explanation is reasonable. If they decide the explanation is not reasonable then the expenses are denied up till the time the taxpayer can prove they were legitimate.

Re: Anyone receiving royalty payments?
 

You have misunderstood me. I'm not suggesting dishonesty. Just pointing out that creative people rarely give up being creative. Very few writers, for example, say "OK, I'm retiring. I'm never going to write another book"

JD Salinger, for example, published his last novel in 1965, when he was in his early 40's. He didn't die until 2010. I don't suppose there was any point he told the IRS that he'd given up being a writer. That's not fraud, just writer's block.

Re: Anyone receiving royalty payments?
 

Interesting discussions folks.

What about the case where you are still proactively marketing the same works year on year (in my case, music compositions). I guess that would not be passive royalties?

Re: Anyone receiving royalty payments?
 

Canada revenue have a page on the reporting of royalties, and do allow for associated expenses:

http://www.cra-arc.gc.ca/tx/ndvdls/t...rylts-eng.html

Re: Anyone receiving royalty payments?
 

This thread has just reminded me that I was a co-author on a small scale publication book many years ago, and I am probably owed some royalties. I need to check that out!