Taylor Swift wrapped up her 149-show, 20-month Eras Tour with a sold-out concert in front of 60,000 fans in Vancouver on Sunday night. And, while an estimated 10 million lucky fans globally got to attend one of her shows, countless others benefited from reselling their coveted tickets, for profits in the thousands of dollars.

For example, a relative told me that he got a pre-sale code to buy tickets, with the intention of taking his fiancée, but when he found out how much he could get for his three floor-level seats to one of the six Toronto shows, he decided to sell the tickets online. He cleared over $10,000 in profit – enough to pay for the band at his wedding reception next summer. Similarly, a Toronto friend was able to secure tickets in the pre-sale to attend one of the Vancouver shows with his two adult daughters, but after researching the cost of flights and finding exorbitant hotel rates for the weekend, decided to resell the tickets online, pocketing thousands in profit.

When I nonchalantly reminded each of them not to forget to report their ticket resale profits on their 2024 tax returns, they each seemed somewhat surprised. Which begs the question: Is the profit from the sale of concert tickets really taxable, and, if so, how should it be reported on your Canadian tax return?

I would suggest that, for most people, other than professional ticket-resellers who make it their business to buy and sell tickets at a profit, concert tickets are capital property, meaning that the profit from a resale of tickets would be treated as a capital gain. That is, the proceeds received from the sale, less the cost of the tickets (your adjusted cost base or ACB) would be a capital gain.

For individuals with less than $250,000 of annual capital gains in a year, the gain would be 50 per cent taxable, meaning that even someone in the top tax bracket of 53 per cent in Ontario or British Columbia would pay a maximum top rate of about 26 per cent capital gains tax on their Swift ticket profits. (Under proposed legislation, which was to be effective June 25, 2024, if your gains are over $250,000 annually, the inclusion rate on capital gains was increased to 66.67 per cent, meaning that the top capital gains tax rate would be closer to 35 per cent.)

But, there are actually some special rules for the sale of what’s known as “personal-use property” (PUP). PUP refers to items that you own primarily for your or your family’s personal use or enjoyment, such as personal and household items, for example, furniture, automobiles, boats, a cottage, and other similar assets. One could make the case that concert tickets are PUP, since they are for the purchaser’s personal use.

Under the PUP rules, if the amount you paid (your ACB) is less than $1,000, it’s deemed to be $1,000 for tax purposes. Similarly, if the cash you receive when you sell PUP is less than $1,000, your proceeds from the sale for tax purposes are also treated as being $1,000. The practical result of these rules is that if both the ACB and the cash you receive for your PUP are both under $1,000, you don’t have to report any gain or loss on your tax return. Note that under the Income Tax Act, you cannot have a capital loss from the sale of most PUP.

Let’s say Katy bought two Swift tickets during the fan pre-sale for $250 each or $500 for the pair. She was able to resell them on StubHub for $5,500 total, yielding a $5,000 profit. For tax purposes, the ACB of her tickets would be deemed to be $1,000. Katy will realize a capital gain for tax purposes of $4,500. While it may be tempting to say that each ticket is its own PUP and thus should have its own ACB of $1,000, special rules apply where the PUP you own is considered to be part of a set, and you dispose of the set to one person. If these rules apply, Katy’s ACB of the two tickets together are deemed to be $1,000.

A group of items is treated as a set where the items would ordinarily be disposed of together, and are generally thought of as belonging together. Often their value as a set is greater than the total value of the individual pieces. The set is deemed to be one single PUP, and the $1,000 minimum cost and proceeds will be shared by all of the properties in the set. This rule is in place to prevent someone from selling parts of a set in a series of transactions to the same buyer, and then using the $1,000 minimum cost for each transaction to reduce the overall gain for tax purposes.

Now, let’s say you bought your Swift tickets with no intention of ever going to the concert. If your purpose from day one was to profit from the ticket resale, then your gain is likely to be considered fully taxable self-employment business income. While it may be hard for the Canada Revenue Agency (CRA) to determine your original intent retroactively, the agency may look to see how soon you listed the tickets for resale after purchase (an hour later? a day? a week?).

You may be tempted to simply not report your Swift ticket resale on your return, perhaps because you believe that your Swift profit is akin to a tax-free windfall, like a lottery win. If you’re wrong, the penalty for unreported income can be 10 per cent of the income you failed to report if this is the second time you didn’t report income in the current and prior three tax years. And, that’s in addition to the tax on the gain, and non-deductible arrears interest.

Wondering how the CRA might catch you? In recent years, the CRA has been known to invoke the “unnamed persons” rule in the Tax Act, which can require a third-party such as a ticket-resale or payment facilitation business to provide information or any documents relating to unnamed persons to the CRA. To do so, however, the CRA must first obtain permission from a judge.

While some readers may accuse me of being casually cruel in the name of being honest, if you fail to report your Taylor Swift profits on your 2024 tax return next spring, and you get reassessed for unreported income, you could be in for a cruel summer.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.

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