Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10 5/3/83; site utcsrgv.UUCP
Path: utzoo!utcsrgv!dave
From: dave@utcsrgv.UUCP (Dave Sherman)
Newsgroups: net.legal
Subject: Re: Computer Programmers Can Be Taxed On Their Programs
Message-ID: <2435@utcsrgv.UUCP>
Date: Fri, 7-Oct-83 13:04:05 EDT
Article-I.D.: utcsrgv.2435
Posted: Fri Oct  7 13:04:05 1983
Date-Received: Fri, 7-Oct-83 13:25:41 EDT
References: <399@wateng.UUCP>
Organization: The Law Society of Upper Canada, Toronto
Lines: 54

>>>>From: padpowell@wateng.UUCP (PAD Powell[Admin])
>>>>Lately, the Revenue Canada (Income Tax to you) has decided that artists works
>>>>are liable to taxation under the same rules as small business.  Briefly,
>>>>and somewhat inaccurately,  if an artist paints a picture,  then it has a
>>>>value,  and hence (according to them), he has to pay tax on the apparent
>>>>CAPITAL GAIN!!!
>>>>
>>>>According to a warning from my friendly legal eagle (actually more like
>>>>a vampire),  the same reasoning can be applied to computer programs.
>>>>
>>>>So:  if you have a home computer system, and have written a program to
>>>>do something, it is quite possible that the Revenue Canada people will
>>>>1.  Crash down your door (no warrent needed).
>>>>2.  Sieze your computer system.
>>>>3.  Sue you for back taxes, based on their idea of the estimated worth
>>>>    of computer programs.

As a lawyer specializing in Canadian income tax (and writing CAI
to teach it to Ontario's law students), I find this report rather
surprising. Are you sure you have your facts right?

If an artist paints a picture and *sells* it (or gives it away),
then a capital gain may well exist. Or it may even be income, if
painting is a business for him. Exactly the same principles apply
to computer programs.

In our system, capital gains which are not yet realized ARE NOT TAXED,
subject to certain "deemed disposition" rules in the event of death,
emigration and other unusual circumstances. I cannot see how writing
a computer program which you do not sell could possibly be subject
to tax. If you sell it, it could be capital gain (one-half of which
is taxed in Canada), or it could be income. In either case your cost
basis for the property is likely to be zero.

The concept of "imputed income", which is valid from an economic
point of view, has never made it into our tax system. This is
the concept that say if you do anything for yourself, you are
saving the cost of paying someone else to do it and thus have
income which could be taxed. (The concept can be applied to such
things as mowing your own lawn or buttering your own toast, in
theory.)

Patrick, if you have anything more specific about this, I would
like to hear it. It's always possible the folks at Revenue Canada
have come up with a new interpretation of the legislation. But
until I get the specifics, I'd have to assume you are misinformed.
I do not believe that an artist who paints a picture and does not
sell it has realized income subject to tax.

Dave Sherman
The Law Society of Upper Canada
Toronto
-- 
 {cornell,decvax,ihnp4,linus,utzoo,uw-beaver}!utcsrgv!lsuc!dave