INCOME TAX

This article is condensed from a relevant part of
The Art World: Law Business and Practice in Canada, by
Aaron Milrad and Ella Agnew, Merritt Publishing Company
Ltd., 1980, $27.95.

At the present time, an artist should calculate the
present value of his inventory of materials at the
beginning of the year, add the purchase price of material
bought during the year, and subtract from this the value
of the material on hand at year end. This calculation
yields the cost of producing the works that were created
during the year.

No value whatsoever will be ascribed to the work in
progress and finished inventory of an artist. Conse-
quently, work in progress and finished inventory is
valued at nil. There has been no change of official
policy concerning the inclusion of the value of materials
inventory in the calculation of income. This may be of
significance to some sculptors and other visual artists
whose works embody a high proportion of costly materials
in relation to the final price.

What is more commonly done by artists, though it is
technically incorrect, is to deduct as an expense the
material bought during the year against sales made and to
disregard any inventories of material in stock. This

shortcut is not recommended.

Expenses and Depreciation: If an artist has bought tools
in a year, their purchase price can be deducted as an
expense, provided that none costs more than $200.00.
Fquipment which costs over $200.00, such as kilns or
printing presses, must be treated as capital items and
capital cost allowance (depreciation) for tax purposes
claimed at the prescribed rates using the declining
balance method.