Can I Get a Tax Exemption for My Company for Buying Artwork?

The simple answer to this question is yes. But there is a lot to look into, to understand who can benefit from tax exemption when buying works of art, according to the part they play in the transaction. Where they are located in the world, will also make a difference, as laws vary everywhere. Here is an overview of the situation in the U.S., which will help you understand better.

The Art of Buying Artworks

For a company to buy artworks, it needs to have a specialist inside the company, who knows what he is doing, or the owner could also be a connoisseur. If the goal is to save money through tax reduction, the company will surely also think about a potential growing value, so it can resell it in the future. It can even contact a specialist outside the firm, if they feel it can be helpful.

The steps to acquire an important piece are multiple. It goes from deciding on the work to be bought by looking at future auctions, and getting it insured, to having it shipped to the office, through the services of a specialist like Convelio. Of course, last but not least, finding a place for it to be positioned inside the company, either in view of all, or inside the President’s office.

What the Law clearly says

Although the IRS always first looks at the interest and intentions of the person buying artwork, before deciding on the tax classification, there is an Article of law (238 AA of the CGI) which states clearly that a company can reduce its taxable profits by deducting the cost of the purchase of a work art. However, it also states that the artist must still be alive. In such a scenario, it will be possible for the company investing in art, to deduct up to five per thousand of the company’s turnover, minus the set of possible deductions.

What the IRS takes in account

It’s important to understand what the IRS might look into, when it is asked to take into consideration the purchase of a work of art, for tax deduction purposes. To understand the process provides a better chance for the deduction to go through, in the end.

What the representative of the IRS will first do, when faced with this situation, is determine who is who. The artist, the art dealer, the investor and the collector, will all be treated differently, in the view of the IRS. In the case of a company buying art, it will naturally fall upon one of the two last categories. But if you present your purchase according to the way it should be done, the company will normally benefit from a tax relief, whether it is considered an investor or a collector.

Tax Information and Resources

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