Here is an excerpt from the CRA on the matter of Artist Inventory:
"Artists' Inventories
¶ 8.
Subject to
9
below, subsection 10(1) requires that in computing income from a business inventory 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 in Part XVIII of the Regulations. Inventory of an artist will include unfinished and finished works of art and materials and supplies that are on hand and unsold at the fiscal year-end of the artist's business. The cost of a work of art includes the cost of materials (e.g., paint, canvas, sculpturing medium) and labour (other than the artist's own labour) used in its execution and an appropriate portion of variable overhead expenses (e.g., fees of models, kiln energy cost). For additional information concerning the valuation of inventory, reference should be made to the current version of IT-473, Inventory Valuation. Because of the special circumstances applicable to artists, the Department will permit them to exclude from inventory any travel expenses related to works of art produced or to be produced by them and to deduct such expenses in the taxation year during which they are incurred. The restrictions in section 67.1 on the amount that may be deducted for food or beverages consumption expenses (i.e., generally, 50% of such expenses-see the current version of IT-518, Food, Beverages and Entertainment Expenses) and the restrictions on motor vehicle expenses (see the current version of IT-521, Motor Vehicle Expenses Claimed by Self-Employed Individuals) must be taken into consideration in determining such travel expenses.
¶ 9.
As a general rule, the cost of property unsold and material unused (i.e., inventory) at the fiscal year-end of a business is only deductible in computing the profit or loss of the business for a subsequent fiscal year when any such property is sold. However, in computing income for a taxation year from a business of creating paintings, murals, original prints, etchings, drawings, sculptures or similar works of art, an individual other than a trust may, under subsection 10(6), elect in the individual's return of income for the year to value the inventory of that business at nil. It should be noted that the election under subsection 10(6) cannot, by virtue of subsection 10(8), be made by an individual in respect of:
(a) any work of art which has not been created by that individual, or
(b) a business of reproducing works of art.
Where an individual has made an election under subsection 10(6) for a taxation year, the value of the individual's qualifying inventory for each subsequent taxation year shall, by virtue of subsection 10(7), be deemed to be nil unless the individual, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, revokes the election."
See the link below for further clarification:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it504r2-consolid/ar...
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