Income Tax Act — I-3.3 10
Valuation of inventory 10 (1) For the purpose of computing a taxpayer’s income for a taxation year from a business that is not an adventure or concern in the nature of trade, property described in an inventory shall be valued at the end of the year at the cost at which the taxpayer acquired the property or its fair market value at the end of the year, whichever is lower, or in a prescribed manner. Adventures in the nature of trade (1.01) For the purpose of computing a taxpayer’s income from a business that is an adventure or concern in the nature of trade, property described in an inventory shall be valued at the cost at which the taxpayer acquired the property. Certain expenses included in cost (1.1) For the purposes of subsections 10(1), 10(1.01) and 10(10), where land is described in an inventory of a business of a taxpayer, the cost at which the taxpayer acquired the land shall include each amount that is (a) described in paragraph 18(2)(a) or (b) in respect of the land and for which no deduction is permitted to the taxpayer, or to another person or partnership that is (i) a person or partnership with whom the taxpayer does not deal at arm’s length, (ii) if the taxpayer is a corporation, a person or partnership that is a specified shareholder of the taxpayer, or (iii) if the taxpayer is a partnership, a person or partnership whose share of any income or loss of the taxpayer is 10% or more; and (b) not included in or added to the cost to that other person or partnership of any property otherwise than because of paragraph 53(1)(d.3) or subparagraph 53(1)(e)(xi). Continuation of valuation (2) Notwithstanding subsection 10(1), for the purpose of computing income for a taxation year from a business, the inventory at the commencement of the year shall be valued at the same amount as the amount at which it was valued at the end of the preceding taxation year for the purpose of computing income for that preceding year. Methods of valuation to be the same (2.1) Where property described in an inventory of a taxpayer’s business that is not an adventure or concern in the nature of trade is valued at the end of a taxation year in accordance with a method permitted under this section, that method shall, subject to subsection 10(6), be used in the valuation of property described in the inventory at the end of the following taxation year for the purpose of computing the taxpayer’s income from the business unless the taxpayer, with the concurrence of the Minister and on any terms and conditions that are specified by the Minister, adopts another method permitted under this section. Incorrect valuation (3) Where the inventory of a business at the commencement of a taxation year has, according to the method adopted by the taxpayer for computing income from the business for that year, not been valued as required by subsection 10(1), the inventory at the commencement of that year shall, if the Minister so directs, be deemed to have been valued as required by that subsection. Fair market value (4) For the purpose of subsection 10(1), the fair market value of property (other than 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) that is (a) work in progress at the end of a taxation year of a business that is a profession means the amount that can reasonably be expected to become receivable in respect thereof after the end of the year; and (b) advertising or packaging material, parts, supplies or other property (other than work in progress of a business that is a profession) that is included in inventory means the replacement cost of the property. Inventory (5) Without restricting the generality of this section, (a) property (other than capital property) of a taxpayer that is advertising or packaging material, parts or supplies or work in progress of a business that