Coming to terms with curling's taxing dilemma

Adam Daifallah

National Post

Tuesday, March 23, 2004

Tax season is here, and most of us are getting ready to take our papers to the accountant. As unpleasant as that yearly ritual might be, it's not as bad as it could be if you're a successful competitive curler. That's because curling winnings are totally tax free. That's right: two of the final frontiers for the tax man in this country are the Internet and curling.

Without getting into wonky technicalities, it boils down to this: because there isn't really such thing as a professional curler (they have to work day jobs to pay the bills, too) curling prize money isn't considered part of business income and is therefore regarded as a windfall for tax purposes. Sort of like winning the lottery.

"Curling would be typical of any hobby and its taxability will depend on whether or not it is considered a 'source of income,' " explained Jamie Golombek, vice-president, taxation & estate planning, at AIM Trimark Investments.

"Canada Revenue Agency's (CRA) position is that a hobby can be a source of income if there is a 'reasonable expectation of profit.' Since with most hobbies, and especially curling where the expenses of travelling, entry fees and so forth can be much greater than the revenue received from potential winnings, such activity is generally not considered a source of income and, as a result, any such winnings would be similar to winning a lottery or gambling, which, unless undertaken as a full-time occupation, results in a tax-free receipt."

But as bonspiel purses grow, and as the game continues to modernize and professionalize, and as curling catches on more and more in the United States, taxation is an issue that is likely to heat up again soon.

Every few years rumours swirl that the government is considering taxing winnings -- usually when one particular team has a hugely successful year financially.

Several teams have cashed in this year, with the rinks of Wayne Middaugh and Jeff Stoughton winning close to $100,000 on the World Curling Tour circuit alone. Add to that that, at least in Middaugh's case, tens of thousands more raked in from non-WCT events like skins games and you're talking serious money -- probably enough to equal the salary earned by some players at their regular jobs.

So is it fair that that money is tax free? Curlers say yes, at least for now. Compared to other sports, curling still has minimal sponsorship money and small purses. The teams that hit the road on weekends are doing so at their own risk, making it like gambling.

Chad McMullan, the executive director of the World Curling Tour, argues that the CRA would end up losing money if they went down this road now. That's because if winnings were taxed, expenses could be claimed.

More teams probably lose money than make money, resulting in a net loss for government coffers.

"I can't even guess how much the government would lose if every Harvey Hacksmasher started claiming all expenses on every weekend toaster spiel he or she played in," McMullan said. "They can't simply tax those that are profitable and ignore the rest. That would be the same as saying only profitable businesses are taxed while businesses with losses don't receive any tax benefits."

McMullan said he looks forward to the day when the tax man invades the curling club, if it means the sport has progressed to the point where players can curl for a living.

"We're still some ways away from teams declaring curling as their primary profession," he said. " Trust me, I'd like to see the day [taxation] happens because it would mean the sport is on very solid ground."

There is no public indication that the CRA is going to start cracking down on curlers, who would prefer not to even discuss the subject. Given the number of teams that make money, there would be no point.

Then again, given the natural proclivity of government to do the exact opposite of what would make sense, I'm not holding my breath.