Here we go again, the first few weeks of January always finds us busy doing our annual inventory count for the end of the year. A long time ago we created forms in our computer Data Base and they have been invaluable ever since to help us calculate inventory. Every business is required to establish a beginning of the year and end of year inventory on their IRS tax forms, and the business of art is no exception.
I find it interesting that for inventory purposes the value of original paintings are calculated based only on the cost of materials, time creating the art is not considered nor is the current market value. But, apon the artists death the value of the paintings in the estate are calculated on market value or appraised value. For an artist who does not have many paintings, or their values are not high, this is not a problem. But if you are successful, this could lead to a problem. To quote ArtBusiness.com “To the Internal Revenue Service, successful means that your entire estate, art included, is valued at over $2,000,000 (raised from $1.5 million in 2006). Under that amount, you have nothing to worry about taxwise, at least at the federal level. Over that amount, better line up a good accountant, an art attorney familiar with tax implications, an art appraiser, and related professionals.“
Among the items we count in our inventory are; note cards, prints, original paintings, frames, mat boards, glass, framing hardware, paint, canvas, rag paper, giclee paper, and giclee inks. Anything that is expendable such as brushes are not counted. Brushes are a cost of doing business and placed under the “supplies purchased” catagory. You can see that it is essential to have a good system gor tracking your art, especially if a lot of work is out on consignment. Even if the artwork is not in the studio, it is your inventory and must be counted.
Gail Niebrugge, business of art
