ARCHIVED - Supplies on hand at the end of a fiscal period

What the "Archived Content" notice means for interpretation bulletins

IT

INTERPRETATION BULLETIN

SPECIAL RELEASE Supplies on Hand at the End of a Fiscal Period

NUMBER: IT-51R2 December 5, 1986

Paragraph 2 of IT-51R2 is being revised to direct readers to the bulletin explaining the election concerning the valuation of the inventory of an individual who is a visual artist. Paragraph 3 of IT-51R2 is being revised to eliminate any misconception which might arise from the wording of the last sentence.

Paragraph 2 is revised to read as follows:

"2. Except where an individual has elected under subsection 10(6) to value inventory at nil in computing income from an artistic endeavour (see IT-504), subsection 10(1) of the Act requires any property that is described in an inventory to be valued at its cost to the taxpayer or its fair market value, whichever is lower, or in such other manner as may be permitted by regulation. Any property described in a taxpayer's inventory that is advertising or packaging material, parts, supplies or other property is thus required to be valued in accordance with subsection 10(1) but if such property has been acquired after December 11, 1979, subsection 10(4) of the Act decrees that its fair market value means its replacement cost. Excluded from the application of subsection 10(4) is any property that is obsolete, damaged or defective or that is held for sale or lease or for the purpose of being processed, fabricated, manufactured, incorporated into, attached to or otherwise converted into property for sale or lease."

Paragraph 3 is revised to read as follows:

"3. Anything that is used primarily for the purpose of advertising or packaging the property that is included in the inventory of a taxpayer is deemed by paragraph 10(5)(b) not to be property held for sale or lease or for the purpose of being processed, fabricated, manufactured, incorporated into, attached to, or otherwise converted into property for sale or lease. This deeming provision ensures that such property is valued at the lower of cost and replacement cost for the purpose of subsection 10(1)."