APAA advisors read the art market’s ebb and flow with insight and accuracy
IN A RECENT ARTICLE IN ARTnet NEWS ENTITLED “AFTER A LONG SLEEP, THE MARKET WOKE UP”, GUNTHER FORG’S CAREER IS ANALYZED IN DEPTH TO ILLUSTRATE AN EXCELLENT EXAMPLE OF A GENERATION OF ABSTRACT ARTISTS THAT HAD BEEN FORGOTTEN AND NOW ENJOY A RENEWED INTEREST IN PAINTINGS THAT SYNTHESIZE BOTH THE TRADITIONS OF ABSTRACT EXPRESSIONISM AND MINIMALISM. THE MARKET FOR GUNTHER FORG’S WORK HAS BENEFITED ENORMOUSLY SINCE HAUSER & WIRTH NOW REPRESENTS THE ARTIST’S ESTATE AND PLANS MAJOR EXHIBITIONS BOTH IN THEIR NEW YORK AND HONG KONG GALLERY AND THANKS TO A TRAVELING RETROSPECTIVE “A FRAGILE BEAUTY”, ORGANIZED BY AMSTERDAM’S PRESTIGIOUS STEDELIJK MUSEUM IN CONJUNCTION WITH THE DALLAS MUSEUM OF ART (ON VIEW THROUGH JANUARY 2019).
HOW DOES A COLLECTOR EVALUATE THIS SPIKE IN FORG’S MARKET WHEN CONSIDERING AN ACQUISITION OF A WORK? WITH THE HELP OF AN ADVISOR MEMBER OF APAA WHO CAN DETERMINE WHETHER THIS IS A TEMPORARY TREND OR A MORE LASTING SHIFT.
IN THE ARTnet ARTICLE PUBLISHED ON NOVEMBER 1st, THE AUTHOR TURNS TO THE EXPERTISE OF WENDY CROMWELL OF CROMWELL LLC, BOARD MEMBER OF APAA:
All Boats Rise With a Rising Tide
Some say the mercurial rise in Förg’s market has less to do with the artist himself and more to do with the market at large, which has expanded and developed an infatuation with overlooked estates over the past five years.
“The market loves estates of good artists with a ton of available material,” art advisor Wendy Cromwell said. “The period between 2013 and the present has been one of unprecedented growth in the art market. There is so much demand and so little inventory. That is why his work became so widely known all of a sudden—after a long sleep, it woke up.”
Even though European audiences may be familiar with the German post-modernist’s work, the advisor contends that he remains underexposed in America—not to mention Asia and further afield. But with the Dallas show underway and Hauser & Wirth’s shows in the works for 2019, a proper contextualization of his broad oeuvre could take him to the next level in the international market.
“A well-curated [museum] show, when it’s good, typically does stimulate growth in the market and I do anticipate that,” Cromwell said.
ANOTHER APAA CONTRIBUTION TO THE UNDERSTANDING OF THE MARKET FOCUES ON THE REVOCATION OF THE 1031 EXCHANGE LAW. DIANA WIERBICKI, WHO HEADS THE ART AND TAXATION LEGAL DEPARTMENT AT WITHERS BERGMAN, WHOSE KNOWLEDGE AND COMMITMENT TO THE FIELD IS RENOWNED, ENGAGES IN A DIALOGUE WITH ART ADVISOR EXTRAORDINAIRE, AND APAA MEMBER, TODD LEVIN, WHO TAKES A MORE CONSERVATIVE VIEW, IN THEIR DISCUSSION OF THE RECENT TIMES ARTICLE.
Ms. Wierbicki thinks the reform will affect some collectors’ willingness to sell. “It depends on the age of the collector,” said Ms. Wierbicki. “The older generation is going to be more thoughtful,” she added. Collectors whose artworks have soared in value may want to pass them onto family members, rather than face a capital gains bill of 28 percent, she said.
As for younger collectors, “this higher expense of getting out may make them think about investing in other markets,” said Ms. Wierbicki.
Others with expertise in the art market point out that the 1031 exchange was only used by relatively few ultra-wealthy collectors who were regular sellers as well as buyers.
“They’re a small subset,” said Todd Levin, an art adviser based in New York. “They’re not the whole art market, and we’re only talking about America. But the effect won’t be negligible.”
IRC SECTION 1031
Thanks to IRC Section 1031, a properly structured 1031 exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. IRC Section 1031 (a)(1) states:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment, if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”
As the above example demonstrates, tax-deferred exchanges allow investors to defer capital gain taxes as well as facilitate significant portfolio growth and increased return on investment. In order to access the full potential of these benefits, it is crucial to have a comprehensive knowledge of the exchange process and the Section 1031 code.
TUNE IN NEXT TIME WHEN THE LRFA BLOG CONTINUES TO SHARE THE EXCEPTIONAL RANGE OF SERVICES THAT APAA MEMBERS PROVIDE.
UNTIL THEN, ENJOY THE AUCTIONS!