Music to a taxpayer's ears
It is the year of Mozart, the 250th anniversary of the birth of one of the
world's most beloved composers. If Mozart were alive today, he might have been
called to testify as an expert witness in a recent tax case.
Alan Belkin is a composer and professional musician who obtained a Ph.D. in
musical arts from the Juilliard School in New York. He's been a professor of
music at the University of Montreal's Faculty of Music since 1982.
Being a modern man, Dr. Belkin uses a computer in his job to research,
compose and play music. In 2001, he purchased a Macintosh 200 to research
computer simulations. The research involved composing and playing back his
compositions on the computer.
When he filed his 2001 tax return, Dr. Belkin claimed tax depreciation of
nearly $2,100 as a deductible expense in his net employment income that year.
Under the Income Tax Act, employees, as opposed to the self-employed, are
extremely limited in their ability to deduct employment expenses, especially in
the area of depreciation. Specifically, the Act only permits employees to
depreciate the cost of automobiles or airplanes, and not much else.
Being a professional musician, Dr. Belkin relied on a different section of
the Act for his depreciation deduction. The Act specifically permits an employee
who is a professional musician to deduct tax depreciation on a musical
instrument. Dr. Belkin's argument, was straightforward: His Mac was his
This was the issue that landed Dr. Belkin in court last December: Can a
computer be a musical instrument?
The Canada Revenue Agency position was that the Mac is "a general-use
computer that can be used for other functions such as word processing and e-mail
aside from the production and composition of music." In other words, the Mac was
a computer and not a musical instrument.
Dr. Belkin produced testimony that clearly showed the evolution of the use of
computers in music and musical composition. He testified that when he was doing
his doctorate at Juilliard in 1982, "studies on the use of computers were
entirely out of the question." Today, the Juilliard School has computer
laboratories for studying simulation of an orchestra.
In fact, a computer is required for the university courses Dr. Belkin teaches
on composition, harmony, counterpoint and orchestration.
Dr. Belkin also testified that some sounds can only be produced with the use
of a computer. As a result, a computer that is used for musical purposes is
quite different from a computer that is used as a word processor.
However, the CRA maintained that the ordinary meaning of the words in the Act
must prevail and thus, "musical instruments and computers constitute two
separate and exclusive categories."
Fortunately for Dr. Belkin, the judge disagreed and concluded that the issue
had to be viewed from a musician's perspective. He ruled a computer could be
considered an instrument if it's used to teach music, create musical works and
produce sounds that a traditional music instrument cannot.
The judge allowed the tax depreciation and also concluded that the Act "can
apply to situations which did not exist when it was enacted, if justified by its
aim and compatible with its wording."
This decision may open the door to a modernization of the Act's employment
expenses rules, which are out of date and discriminate against employees as
opposed to the self-employed.
In 2004, the Supreme Court of Canada acknowledged this disparity in the case
of broker who was unable to deduct the cost of buying another broker's client
list. The Supreme Court highlighted this unfairness, saying, "employees are
treated differently than taxpayers earning income from business. ... This
seemingly inequitable result is the result of the structure of the [Income Tax]