Fine art photography and digitally created artwork are two separate but loosely connected subjects. Both are capable of producing multiple copies of a given image. What brings them into the fine art category, aside from the manner in which they are created, is the manner in which they are presented to the public and offered for sale. It is up to the artist to decide whether the image will be offered as an art print, limited or otherwise, or as a 'one-off' original artwork. Those who take the latter approach assure the gallery and collector that there is and will be only one such image printed and offered for sale. The reputation and integrity of the artist give comfort to the gallery operator and the collector that it will be so and consequently such works command higher prices than those offered in multiple prints.

There are no recent tax cases dealing with photography as a fine art business. The older cases have generally gone against the taxpayer when the Canada Revenue Agency (CRA) applied the Reasonable Expectation Of Profit (REOP) rules as set out in their interpretation bulletin, IT 504R2. More recently, in the case of Stewart v. The Queen (2002 DTC 6969), the Supreme Court of Canada found that the REOP test was secondary where there was no personal element in the business and that the main test is a positive answer to two questions—are you carrying on a business and are you in pursuit of profit?

It would seem then that fine art photographers would need to meet the same criteria that fine art painters do in order to deduct their expenses from their incomes. This issue is covered in my article in the February 2005 issue of the Opus Visual Arts Newsletter which is archived on their website at www.opusframing.com/newsletter2/archives.html Digitally created artwork has emerged along with the rapid development in computer technology and is showing up in many galleries. It has also revived the age old question "yes, but is it art?".

The connection between the two subjects is that each may or may not qualify as fine art but must qualify before the taxpayer can benefit from the tax advantages available to the self-employed artist, i.e., electing zero value inventory and favourable treatment of charitable donations of artwork.

If you are unsure about any aspect of this issue you should check with your tax advisor to make sure that you are onside with the tax rules.

Special Guest Contributor Robert McMurray