Dear Sirs:
Re: Capital Cost Allowance for Artwork
This is in reply to your letter of May 30, 1990, requesting a technical interpretation regarding the appropriate classification of artwork (a print, etching, drawing, painting, sculpture or other similar works of are, the cost of which to the taxpayer was not less than $200) for capital cost allowance purposes. We apologize for the delay in replying.
If the artwork was created by a non-Canadian, the property is not included in any class by virtue of subparagraph 1102(1)(e)(i) of the Income Tax Regulations (the "Regulations"). This is so because art objects typically do not depreciate; rather the opposite is the case. Indeed, art is often purchased for investment purposes. Accordingly, no Capital Cost Allowance may be claimed by the taxpayer regardless of whether that taxpayer is a proprietorship, partnership or a corporation.
However, if the artwork was created by a Canadian, within the meaning assigned by paragraph 1104(10)(a) of the Regulations at the time the property was created, the restrictions imposed by subparagraph 1102(1)(e)(i) of the Regulations do not apply. Accordingly, the artwork would qualify as a Class 8 asset eligible for capital cost allowance at a rate of 20%. This assumes that the artwork was acquired by a business for the purpose of gaining or producing income.
We have enclosed Interpretation Bulletins IT-128R and IT-332R which discuss further capital cost allowance deductions and personal use property. However, we are not aware of any other tax related incentives that are available with respect to the depreciation of Canadian art. Of course, a work of Canadian art may be eligible for certification as a
Canadian cultural property and the Income Tax Act provides rules for the girting of such property to designated institutions. This topic is discussed in Interpretation Bulletin IT-407R3, a copy of which is also enclosed for your convenience.
We trust our comments will be of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch