Worth Nothing or $65 Million?

That's the question that lawyers of the heirs of New York art dealer Ileana Sonnabend and the IRS are arguing in this Catch-22 case involving artwork by Robert Rauschenberg:

Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero.
But the Internal Revenue Service takes a different view. It has appraised “Canyon” at $65 million and is demanding that the owners pay $29.2 million in taxes.
“It’s hard for me to see how this could be valued this way because it’s illegal to sell it,” said Patti S. Spencer, a lawyer who specializes in trusts and estates but has no role in the case.

Link

Because It's Tax Time

For artists in the Metro Vancouver area, Quantum Accounting Services is headed by Nigel Jones. His is a company I would trust to do my taxes because of his firm's familiarity with the arts.

I also trust Heming, Wyborn and Grewal because a partner there until recently, was Bob McMurray who is a past president of the Federation of Canadian artists.

Whenever I file my taxes, I enclose print outs of the CRA Interpretation Bulletins listed here.

Tax Question

Question: i Chris, My partner is a visual artist (painter), and I am currently preparing his 2010 income tax return. He's purchased a lot of books, movies, and music to inform and inspire him in his work. What kind of expense would I claim this as? Thanks so much. I can't find the response anywhere in your book "Artist Survival Skills". Natalie

Answer: I am not a tax expert and I have to consider my liability when I provide the advice I give —this is what my professional partners have taught me. So advice about taxes and other legal issues are high-risk for me. I did not write the tax chapter in my book, Bob McMurray, an artist and accountant did. I ask him a lot of questions when I answer tax questions.

But I would not claim these expenses you are asking about. By extension, every sensual/intellectual experience an artist has is capable of inspiring a piece, but you have to pay taxes. There has to be a evidentiary trail to make a legal claim; a specific movie or book may relate to a specific work, but that is such a slight occurrence in the grand scheme of things, and the expense so small, it is hardly worth claiming, and the fact that one work may be inspired by one movie does not qualify all movies as a legitimate expense.

I have been audited and I believe such claims would be refused, but this is just my opinion, Natalie. An accountant can give you professional advice.

Artists and Canadian Tax Laws

You MUST know these interpretations of Canadian tax law, or you must give them to your accountant. They help you maximize your tax credits, minimize your taxes payable and explain repeat annual losses (if you have them).

Bulletin 504R2, “Visual Artists and Writers”

Online version here.

Bulletin IT514 “Work Space in Home Expenses”

Online version here.

Bulletin IT473R “Inventory Valuation”

Online version here.

There are many other interpretation bulletins that may be of interest to you at the CRA Site (claiming car expenses, claiming support payments, etc) depending on your circumstances.