Ralph E. Lerner’s “Tax and Estate Planning Issues Facing Owners of Tangible Personal Property: Surveying the New Gift Landscape for Artwork and Collections”
Summary: In this article, Ralph E. Lerner discusses potential issues facing owners who would like to sell, donate, or move their art or collections. Included are steps, advice, and the relevant legal documents or institutions that one might encounter.
Excerpt: United States tax laws provide an incentive for individuals to contribute during their lifetime or on their death works of art to United States tax exempt organizations, that is, museums, universities and other organizations that display and make use of works for art in furtherance of their tax exempt purposes. The lifetime transfer of a work of art to a charitable organization saves the individual donor income taxes because of the allowable income tax deduction; at the same time, the lifetime transfer relieves the donor of the expense and the worry connected with the maintenance of a valuable work of art. For example, a painting that cost the donor $1,000 some years ago may have a fair market value of $10,000 today. A contribution today of the painting to charity that meets all the requirements discussed below produces an allowable charitable deduction of $10,000. For someone in the 35.0 percent tax bracket, such a contribution saves $3,500 in federal income taxes. Since the donor’s out-of-pocket cost was only $1,000, the taxpayer has made a $2,500 tax-free economic profit and has enjoyed the use of the painting through its years of ownership at no cost. The problem is to make sure the contribution is correctly made, so that the tax benefit described is achieved. Note that the tax benefit just described is available only for contributions to United States tax-exempt organizations and not for contributions to foreign tax-exempt organizations.
If you would like to read the full article, you can click the link below to download a PDF version of Ralph E. Lerner’s complete article.