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Investing in Canadian Art – A Tax Perspective

The Income Tax Act allows very few opportunities to purchase an appreciating asset while simultaneously receiving a deduction for that asset. The purchase of Canadian Artwork may be one such opportunity.

As we near year-end for many corporations, companies with profits are looking for ways to reduce their tax burden. This is especially so given the Accelerated Investment Incentive introduced in late 2018.

For qualifying artwork, companies can deduct for tax purposes an amount annually for depreciation. This amount is normally equal to a 20% declining deduction. To qualify, the artwork must meet the following criteria:

  • The artwork cost $200 or more,
  • is not held for resale, or otherwise included in inventory,
  • is acquired for the purpose of gaining or producing income from an arm’s length individual, and
  • was created by an individual who was at the time a Canadian.

As an example – in 2013 a Toronto based law firm acquires a piece of art from a local art gallery for $20,000 to display in their lobby. The artist who originally produced the work was a permanent resident of Québec at time of creation. Since the artwork was created by a Canadian artist, costs over $200, and is used as a beautifying fixture in their office, the $20,000 acquisition would be considered a Class 8 capital asset for tax purposes and would be eligible for deduction at a declining rate of 20% per year. Due to CRA’s half-year rule, the deduction in year 1 would be equal to $2,000, or half of the normal 20%.

With the new Accelerated Investment Incentive rules, the year 1 deduction in the above example would be increased to $6,000 if the artwork were purchased in 2019. This offers a way for companies to reinvest inside their business, reduce tax, and participate in any appreciation in the value of the artwork.

So, what happens in the event that the artwork does in fact appreciate and is subsequently re-sold? Investors should be mindful that any sale of a depreciated art asset will result in recapture, up to the amount originally paid for the artwork. This recapture will be included as business income, and any amounts received over and above the original cost would be considered a capital gain. Given the tax deferral in this scenario, purchasing Canadian artwork could be considered as a viable tax planning opportunity.

If you’re looking to scope out some Canadian artwork, we encourage you to check out a local gallery like the Herringer Kiss Gallery’s beautiful location in Sunalta, whose current exhibits run until December 21.

The above is for general information purposes only and should not be considered tax advice. The Income Tax Act has many nuances and exceptions; we strongly encourage you reach out to a Chartered Professional Accountant regarding the specifics of your purchase to determine if it will qualify for a deduction.

Update and Giving Back

It’s been a busy few months at Cascade!

We successfully made it through our first “busy season” under our new brand. Our clients have provided positive feedback on our new business model, which reaffirms that our model is adding value to our clients and their businesses.

We ran our first annual Tax Clinic in conjunction with Norfolk Housing. Cascade volunteered early in April to provide personal tax services to those who may not have the ability or expertise to navigate their own tax returns. This can effect real change for these individuals, as 50% of Norfolk’s tenants are low-income and may be eligible for income supplements if they file their tax returns.

We’ve added a fantastic new staff member to our team.

After a great busy season, we found some time to enjoy a few Stampede events, meet some great people, and volunteer at Norfolk Housing’s annual Stampede breakfast, which had over 400 residents and community members stop by.

And most recently, the firm participated in and volunteered at the 6th annual Kenn Borek Air charity golf tournament, which was raising money for the Quinterra Legacy Garden. Cascade was able to contribute as a minor sponsor as well. In total, over $14,000 was raised for a memorial garden to provide a peaceful, contemplative and vibrant outdoor space for Calgarians to reflect, heal and remember.

golf.jpg

 

New Office Finalized

If you’d like to stop by for a visit, you can find us above the Sunterra in Britannia Plaza…

After a couple of months of renovations and finishing touches, we’re happy to share a few before and after pictures of our space. If you’d to like stop by to see in person, you can find us on the second floor of Britannia Plaza. Otherwise, take a look below and let us know what you think!

 

 

 

 

 

A special thanks to Starwall West for the glasswork, and Magda Gawlik for help with our design!

We’re open 8am to 5pm – stop by and say hi!

-Cascade

 

Reminder: T-Slips due February 28th

Just a friendly reminder to everyone that you have three days to file your t-slips for the 2018 calendar year. If you’re unsure whether you need to do this, be sure to reach out to your accountant. It can sometimes make sense to pull out a dividend even if you don’t need the income immediately. This is especially true when you have a large purchase or withdrawal coming up in the next 2-3 years.

Renovations and Resolutions

Here at Cascade we’ve been busy renovating our new space and working towards our goals for the New Year. We anticipate having the new location operational by mid-February. The place is coming together nicely and we’ll have some before and after pictures to share soon. In the meantime, here is a sneak peak at the (centrally located) new space under renovations.

sneak peak

Also, we’d like to send out a shout-out to Magda Gawlik from MMADE DESIGN who helped us with the design process. She was great to envision a few options for us, and help us sort out which one we liked best.

sneak peak

Happy Holidays!

With Christmas fast approaching, our team is scaling back our hours until the New Year. We’re still available for communication, but any non-urgent requests will wait until 2019.

We wish you an enjoyable holiday break with your family and loved ones. The next 10 days will go very quickly – take the time to slow down and appreciate all of the little reasons why you work so hard for the rest of the year.

Happy holidays, and see you in the New Year.

Cascade Launches

“…we’re happy to announce that we’re renovating our permanent location.”

With Cascade officially up and running, we wanted to take a moment to share some of our story and what exactly it is that we’re doing for our clients.

We have two updates today, the first being on our location.

Currently, we occupy a space in the Beltline that is centrally located and conveniently offers parking. This has worked well and we have been serving our clients from here. However, we’re happy to announce that we’re renovating our permanent location, located outside of the core but very central and with ample free parking. We’ll formally announce the location in the coming weeks so stay tuned for this.

And second, we wanted to say thank you to all of those who have supported us on our venture. Today, we’re especially thankful for our service partners who have been instrumental providing exceptional service for our clients. We work with teams of Financial Advisors, Bookkeepers, Contract CFOs, Bankers, Lawyers, and others to ensure that client needs are being met and expectations exceeded. We’ve had a number of meetings over the last two months with our service partners to ensure our service standards continue to be upheld, and these meetings have reaffirmed that we’ve surrounded ourselves with the right people.

If you want to give a shoutout to any of your favorite service partners, I encourage you to do so below.