Guide to Corporate Art Purcase Allowances and Requirements

Dear Art Buyer,

In order to assist your art purchasing decisions, we've put together
guide for corporate art purchasing tax allowances in Canada.

Canvas Gallery is available at your convenience to assist with your investment
in Original Canadian Artwork.

Sincerely,

Mark Hunter
owner, Canvas Gallery


Art purchase by a corporation can be considered as either:
a) inventory (with the intent to resell), or
b) capital acquisition (as an investment for display to improve their business
environment for clients)

If the purchase is a capital acquisition, it can be claimed as a class 8 capital cost
allowance depreciable at a rate of 20% per year.
Purchase must be original artwork by a Canadian artist (citizen or permanent
resident).

Artwork valued at less than $200 is a one-time class 12 deduction at 100% of the
purchase price.

Artwork valued at greater than $200 can be claimed at 100% of purchase price as a
class 8 capital cost allowance depreciable at a rate of 20% per year.

Example: If a painting is $10,000, the amount that can be claimed each tax year is:
Year 1 - 20% of $10,000 can be claimed as a deduction = $2000
Year 2 - 20% of $8000 (the remaining value from year 1) =$1600 etc.

In the event that the artwork is sold by the business (ie. sale of a corporate asset)
there are two different factors to consider depending on whether the artwork has
appreciated or depreciated in value.

1. a) If the artwork is sold for less than the remaining undedicated cost of the
artwork, the balance can be claimed as a terminal loss deduction. For
example, if $1000 still remains unclaimed based on class 8 capital cost
allowance depreciation rate but the work is sold for $500 due to depreciation
of the artwork, then the remaining unclaimed cost of $500 can be claimed as a
terminal loss deduction.

2. b) More commonly, if the artwork has appreciated in value and is sold for more
than the purchase price the amount that has already been claimed as a class 8
capital cost allowance will be subject to recapture. The claimed amount will
then 3be considered business income in the year of sale. The profit from the
sale will be subject to capital gains.