The hottest commodity in Toronto this Halloween weekend wasn’t a Labubu costume but coveted
Toronto Blue Jays
World Series tickets. This is the first time the Jays have made it to the World Series since 1993.
As I write this column, the cheapest seats in the Rogers Centre for Friday’s Game Six, way up in the 500 level, in deep, deep right field, were going on online seller StubHub for just under $3,000 a piece, with prices expected to climb as gametime approaches. The face value on these tickets, however, is significantly less, meaning that lucky ticketholders who secured tickets to the fall classic can potentially sell their tickets for a substantial profit.
Which begs the question: How is the profit on the sale of Jays tickets taxed? For me, this question is not merely academic, but personal as I have World Series tickets. Let me explain.
As a lifelong Blue Jays fan, I have fond memories of attending games as a teen at Toronto’s Exhibition Stadium, sitting in the $2 bleachers’ benches on a Sunday afternoon, where our seats, which faced the wrong direction, were so far away we could barely see the diamond.
In 1992, when the Jays first won the World Series, I was a budding young accountant, fresh out of university and starting my first job at a large international accounting firm on
Bay Street.
Neither I nor any of my friends could afford playoff tickets, so we gathered around the 20-inch colour TV in my bachelor pad to watch the Jays win the World Series. We did the same thing in 1993.
Fast forward to 2015, when I decided to take the plunge and bought Jays season tickets in the upper deck. It allowed me to take my kids to the legendary 2015 Bautista bat flip game and attend the Jays’ playoff run again in 2016. I’ve hung on to my season tickets ever since, upgrading my seat locations a few times over the past decade. So, when the Jays finally made the World Series this year for the first time in 32 years, the opportunity to attend a World Series game in person, rather than sell my tickets, was, as Mastercard put it, “Priceless.”
But, what if I did sell my tickets for a profit, how would it ultimately be taxed?
Readers may recall I first tackled this subject last year in the context of
Taylor Swift tickets
, so here’s a quick refresher. For most people, other than professional ticket-resellers who make it their business to buy and sell tickets at a profit, Jays tickets are likely to be considered 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 (the adjusted cost base or ACB) would be a capital gain. Capital gains are 50 per cent taxable, meaning that even someone in the top tax bracket of 53 per cent in Ontario would pay a maximum top rate of about 26 per cent capital gains tax on their Jays ticket profits.
But there are some special rules for the sale of what is 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 including furniture, cars, boats, a cottage and other similar assets. One could make the case that Jays 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 is 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.
In my case, the cost of my World Series tickets, as a season ticketholder, was $250 each or $500 for the pair. If I could resell them on StubHub for $5,500 total (after fees), I would net a $5,000 profit. For tax purposes, the ACB of my tickets would be deemed to be $1,000, and I would 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, the 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 I had bought my Jays tickets with no intention of ever going. 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 to determine your original intent retroactively, the CRA may look to see how soon you listed the tickets for resale after purchase, the frequency with which you buy and sell tickets and whether the profit realized from such sales is a significant part of your annual income.
Jamie Golombek,
FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto.
Jamie.Golombek@cibc.com
.
If you liked this story,
sign up for more
in the FP Investor newsletter.
