Acquisition or resale of artworks

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Let us recall first that the governments of Quebec and Canada have introduced an incentive in the form of depreciation for a company or individual in business. This regressive deduction is 33.33% of the acquisition cost of the artwork in Quebec and 20% in federal.

 

To benefit from this measure, it must meet two basic criteria. First, the acquisition must be made in order to earn income. In other words, this means that the artwork must be acquired by a person (individual business or company) in a commercial context, for example, to be exhibited in a business place in full view for the customers. Second, the artwork must have been done by a Canadian artist.

 

To illustrate the impact of these government regressive cuts, consider the following example. A company or business person buys an artwork by a Canadian artist to hang in an office at the sight of customers. The cost of the artwork is $ 5,000. Amortization of the artwork will therefore be at 20% per year for federal income tax and as to 33.3% for Quebec tax.

 

In the case of resale, if the artwork has been fully depreciated at both levels of government, an inclusion of an amount equal to the original cost of the artwork will be included in computing income (tax recovery). The difference with the resale price will be considered a capital gain. For example, if the 5,000$ artwork is sold several years later at a price of $ 8,000, the $ 5,000 amortized will be declared as a depreciation recapture (100% included in computing income) and the $ 3,000 difference as a capital gain (less than 50% in the calculation of income).

... Read more (French)

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*Source: Samuel Larochelle, L'art et le fisc : Un mariage payant. La Presse August 11th 2013.