The Taxation of Art – Dealer Investor or Collector


1996 Estate Planning Conference
1997 UJA Federation Conference
2000 Westchester Community College
2000 Boston Bar Association

Ralph E. Lerner’s “The Taxation of Art – Dealer Investor or Collector”

Summary: In this article, Ralph E. Lerner discusses tax issues in the United States. This includes specific cases, specific laws, as well as general definitions and guidelines of the tax system in place.

Excerpt: Maintaining a collection in good condition is expensive; the expenses may include framing, reframing, lighting, air conditioning and humidity controls, cleaning and other maintenance, security devices, publications, and insurance. The collector may incur travel and other buying expenses and fees when he or she adds to a collection. Those costs have increased substantially in recent years.

This section focuses on the deductibility of the expenses of maintaining a collection, the tax treatment of gains and losses realized on sale of a collection, whether a collection can be used in a tax free exchange, certain problems of insurance, and sales tax issues. Identification as a dealer, an investor, or a collector and the tax ramifications of each are discussed.

May an art owner deduct all, some, or a portion of such collection-related expenses and losses incurred in holding the collection as an investment, or are all those expenses nondeductible personal expenses incurred in a hobby for personal use and enjoyment? Before that question can be answered, it is necessary to determine whether the individual in question is a dealer, an investor, or a collector and to examine the general statutory provisions.

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.

The Taxation of Art