Recent news of “Freeports” opening in Delaware prompts a review of what these facilities are for, what they are not for, and where collectors and dealers can get themselves into trouble. When used carefully there are meaningful tax efficiency opportunities, but no one should think that they are or can be a one-stop way to avoid sales tax in particular. Thoughtful planning is the key.
Topics: New Hampshire, Fritz Dietl, David Arendt, Delaware, Geneva, Oregon, Luxembourg, Pure of Love of Art Versus Mere Investment, Customs, Crozier Fine Arts, yco International Ltd., Sales & Use Taxes, Dennis Kozlowski, Delaware Freeport, Freeports, Alaska, Tax, Montana
There has been considerable coverage in the last week about so-called “like-kind” exchanges of art, and federal tax. This has been driven by two factors: President Obama’s 2016 proposed budget, which would eliminate the tax deferral on these “1031 exchanges” for art and collectibles, and a recent New York Times article entitled “Tax Break Used by Investors in Flipping Art Faces Scrutiny.” The prospect of actual change is dubious, but there is no question that the prospect of the elimination of this tax deferral means anyone who is considering such an exchange for their art and collectible collection should be paying attention.
The Fifth Circuit Court of Appeals has overturned a Tax Court decision in a ruling that has major implications for estate planning and works of art. While the central basis for the decision in favor of the Estate of James Elkins was the inexplicable failure by the IRS to rebut the taxpayer’s evidence, the decision nonetheless offers guidance for an important estate planning tool: fractional interests. Eileen Kinsella has also analyzed the case at Art Net (I’m quoted) here.
Topics: estate tax, Estate of James Elkins, fractional interest, Eileen Kinsella, GRIT, Tax Court, 5th Circuit Court of Appeals, Court of Federal Claims, Estate Planning, ArtNet, Grantor Retained Income Trust, Tax, Elkins
As posted at the Art Law Report two weeks ago, a settlement of the IRS dispute over Robert Rauschenberg’s work “Canyon”—which incorporates a stuffed bald eagle, thus implicating criminal statutes prohibiting any sale or transfer of the national bird—has been announced publicly.
At Friday’s outstanding Art Law Day presented by the Appraisers Association of America, among the highlights were talks by Ralph Lerner and Judith Bresler, co-authors of the indispensable Art Law (just published in its fourth edition). As part of a panel on Philanthropy and the Law, Lerner gave a notable update on one of the biggest art law stories of the year, the Sonnabend heirs’ battle with the IRS over Robert Rauschenberg’s collage Canyon.
Topics: Art Law Day, Ralph Lerner, IRS Art Advisory Panel, Canyon, Robert Rauschenberg, Events, Appraisers Association of America, 1918 Migratory Bird Act, 1940 Bald and Golden Eagle Protection Act, Tax, Ileana Sonnabend, Judith Bresler