13 July 1998 External T.I. 9813595 - PURCHASE OF ART WORK

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Tax treatment of purchase of original works of art.

Position:

1. May qualify for inclusion in Class 8 if conditions met.

2. Consider Certified Cultural Property.

3. Could be personal use property.

Reasons: Interpretation Bulletins: IT-128R, IT-332R & IT-407R4.

XXXXXXXXXX 		981359
Wm. P. Guglich

July 13, 1998

Dear Sir:

Re: Purchase of Art Work

This is in response to your letter of May 6, 1998, wherein you requested technical publications concerning the purchase of original works of art.

We have enclosed Interpretation Bulletins: IT-128R, Capital Cost Allowance - Depreciable Property, IT-332R, Personal Use Property and IT-407R4, Dispositions of Cultural Property to Designated Canadian Institutions. We also offer the following general comments.

Generally, artwork (a print, etching, drawing, painting sculpture or other similar work of art) acquired by a taxpayer (a corporation, individual or partnership), could qualify as a Class 8 asset eligible for capital cost allowance at a rate of 20% provided certain conditions are met. These conditions include:

• The artwork was acquired for the purpose of gaining or producing income.
• The artwork is not described in the taxpayer's inventory.
• The cost of the artwork to the taxpayer was $200 or more.
• The individual who created the artwork was a Canadian.

These rules are contained in subsection 1102(1) of the Income Tax Regulations. For further comments regarding capital cost allowance, please refer to Interpretation Bulletin IT-128R.

Artwork acquired for personal enjoyment would be considered "personal-use property" and would not qualify for capital cost allowance. Interpretation Bulletin IT-332R discusses "personal-use property."

There are specific rules in the Income Tax Act for dispositions of "Certified Cultural Property" to a designated institution or public authority. Interpretation Bulletin IT-407R4 discusses the income tax implications respecting dispositions of "Certified Cultural Property".

We trust that our comments and the enclosed Interpretation Bulletins will be of assistance.

Yours truly,

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch