January 12, 2015 by Marion Maneker
Mitchell and Emily Rales
The past two weeks have seen an onslaught of art market coverage from the New York Times suggesting—if the magazine cover indicator is still in effect (the indicator says that when a subject becomes visible enough to warrant a magazine cover, it is sign the trend has already peaked)—we may already be past the top of the art market or interest in art.
The Times’s two previous stories were a provocative profile of collector Stefan Simchowitz and a summary of the trend toward auction houses providing direct guarantees to goose their profit margins while assuming greater risk.
This weekend it was time for another summary article. Patricia Cohen put together a very good round up of the issue surrounding private museums and their incredible growth over the last eight years. For those unfamiliar with the art world, this will be news. To the rest of us, the growth of private museums is part of what has been driving the art market, especially in the years since the credit crisis.
Here Cohen provides some useful context:
Collectors used to be able to donate works to a museum while keeping the art in their own homes while they were still alive. But a change in the tax law in 2006 outlawed the practice.
Although there are no verifiable figures on the precise number of private art museums and foundations in the United States, art advisers and tax experts who deal with wealthy collectors say the total is growing. “There’s definitely been a major uptick in this area,” said Adam von Poblitz, head of estate planning at Citi Private Bank and a tax expert. He said he was currently in discussions with a half-dozen families about creating private museums or private operating foundations for their art collections.
Even better are the asset figures that Cohen culled from tax filings. Mitchell Rales’s Glenstone museum has total assets (not all in art) valued at $702m; Peter Brant’s Greenwich foundation lists $93m; and Andrew Hall’s foundation in Vermont comes in at $38m.
Much of the reaction to the article depends upon the reader. That includes the way that private collections are presented in the article. Attendance figures for the Barnes Collection—which was moved to the center of Philadelphia for greater public access, a move opposed by many who primarily view art as a public trust—were offered in comparison to the limited access of the Brant and other foundations.
Art Collectors Gain Tax Benefits From Private Museums (NYTimes.com)
2. NEW YORK - Tax Break Used by Investors in Flipping Art Faces Scrutiny
By GRAHAM BOWLEYAPRIL 26, 2015
Introduced in the 1920s to ease the tax burden of farmers who wanted to swap property, it soon became a tool for real estate investors flipping, say, office buildings for shopping malls.
Now, this little-known provision in the tax code, known as a like-kind exchange, has become a popular tactic for a new niche of investors: buyers of high-end art who want to put off — and sometimes completely avoid — federal taxes when upgrading their Diebenkorns for Rothkos.
“You can defer millions of dollars of taxes,” said Josh Baer, an art adviser who helps clients take advantage of the tool.
The exchanges have become prevalent enough, and the cost to the government significant enough, that the Obama administration is seeking to eliminate them, a prospect causing no shortage of alarm in sectors of the art world... More http://www.nytimes.com/2015/04/27/arts/design/tax-break-used-by-investors-in-flipping-art-faces-scrutiny.html?ref=arts&_r=1