Leslie Rankow Fine Arts

INTERNATIONAL ART ADVISORY SERVICE

Tag: Art law

Christie’s welcomes this spring’s Art Business Conference on March 30th, 2020

Louise Hamlin
Art Business Conference
New York, London, Hong Kong

Returning to New York in March 2020, The Art Business Conference is a one-day conference for art market professionals.

If you’re involved in buying, selling or caring for fine art or antiques – whether you are a gallery owner, manager, art advisor, auctioneer, private collector or professional advisor, this conference will explore the key issues affecting the international art market today.

Through presentations, Q&As, panel discussions, and workshops, industry experts will share advice and insights on many of the key factors in running an art business or collection – including the the latest updates in legislation and taxation.

Christie’s New York

Enroll now for an informative and productive day:

https://www.eventbrite.co.uk/e/the-art-business-conference-new-york-2020-tickets-90201903321

This year’s topics will include:

  • Private Foundations, the collecting journey, legacy and impacting investing
  • Sustainability – exploring how art organizations can be more sustainable
  • Recruitment – how to find, train and retain the best art world candidates
  • Important updates on AML5 – this is now officially law in the UK & EU (as of Jan 10) and is relevant to any US business with UK or European clients.  This session will present an overview of the law and the guidelines for implementing business practice for your art business.
  • Inside the collector’s head – the neuroscience and behavioral economics of art collecting.
  • Pictures Never Lie? The Use and Misuse of the Latest Imaging Technologies for Examining Paintings.
  • The language of Art & Technology – what are API’s and how are they applicable to the art market?

The roster of speakers is impressive, to say the least, covering a range of timely subjects. To highlight just a few of the speakers, the Art Business Conference New York 2020 features the director of a Foundation in Dubai that brings Western art to the Middle East, an influential collector and gallerist in New York and Los Angeles, a collector and scholar of export porcelain and neurologist who shares her insights on the psychological motivations of the collector, an expert on Art Law and Luxury Assets recognized by the leading legal directories and praised for her “great technical knowledge of the issues”, and an expert in the scientific analysis of fine arts focusing on questions of attribution, authenticity, preservation and provenance.

 

Deborah Najar

DEBORAH NAJAR

Deborah is the Founder of the JPNF (Jean-Paul Najar Foundation), a museum for Contemporary Art located in Dubai’s Alserkal Avenue.  Among the first non-profits in the UAE, the JPNF came about as a partnership with Alserkal Avenue, from a desire to offer a diverse artistic experience, with strong emphasis on patronage, archives and western abstraction. The JPNF is a museum of contemporary art that is home to a collection of European and American abstract art from the 1960s through today. It is also the custodian of a remarkable archive tracing forty years of artist-collector exchanges.

Adam Lindemann

ADAM LINDEMANN

Adam is best known as a taste-maker in collecting and investing in contemporary art and design. He operates Venus Over Manhattan, the influential gallery devoted to iconoclastic exhibitions both historic and contemporary. He has been a featured commentator in several documentaries and interviews relating to collecting and art, including recent features on the BBC, Charlie Rose, and Reuters. He lives and works in New York City.

Shirley Mueller

SHIRLEY MUELLER

Shirley M. Mueller is a collector and scholar of Chinese export porcelain as well as a physician board-certified in Neurology and Psychiatry.  The latter expertise led her to explore her own intentions and emotions while collecting art, which, she discovered, have broader applications.  This new understanding was the motivation for her recent book, Inside the Head of a Collector:  Neuropsychological Forces at Play.

Amanda Gray

AMANDA GRAY

Amanda is a Partner in Mishcon Private at Mishcon de Reya, specialising in Art Law and the related field of Luxury Assets.  She is valued by her clients for her commercial, flexible approach and depth of knowledge across a diverse range of legal problems faced by those operating within the art market and luxury assets fields. Amanda works on both contentious and non-contentious matters including, but not limited to, disputes arising over all due diligence matters (for example title, authenticity, attribution and condition) contractual  disputes and special project work concerning arts and cultural property.

Jennifer Mass

JENNIFER MASS

Jennifer L. Mass is President of Scientific Analysis of Fine Art, LLC (SAFA) and the Andrew W. Mellon Professor of Cultural Heritage Science at Bard Graduate Center. She formed SAFA in 2007 because of a growing need for the objective material assessment of objects in the art market to complement the expertise of the connoisseur and the conservator.  Her work at SAFA allows her to assist art collectors, dealers, auction houses, and private conservation firms in addressing questions of attribution, authenticity, state of preservation, provenance, and mechanisms of degradation.

In the Business Pavilion, you can meet speakers and our exhibitors to continue the discussions and expand your art business network.

Ticket prices include entry to all sessions, breakfast networking, refreshments, lunch and post-conference networking drinks.

See you on March 30th!

London, New York, and soon Asia: Venues for the Art Business Conference with director Louise Hamlin

BARELY RECOVERED FROM THE MASSIVE AUDIENCE AND ENTHUSIASM OF THE LONDON ART BUSINESS CONFERENCE ON SEPTEMBER 4th, LOUISE HAMLIN, FOUNDER AND ORGANIZER OF THE ART BUSINESS CONFERENCE, IS PLANNING THE NEW YORK SPEAKER PANELS AND AGENDA. THE NEW YORK CONFERENCE WILL BE HELD AT THE TIME WARNER BUILDING IN MANHATTAN NEXT APRIL 2019.

IN THE MEANTIME, THE LRFA BLOG WILL CONTINUE ITS INTERVIEW WITH LOUISE ABOUT THE CURRENT PROGRAMMING AND HER PLANS FOR THE FUTURE OF THE CONFERENCE. YOU COULD HARDLY IMAGINE THAT A WOMAN OF THE CALIBER AND ENERGY OF LOUISE HAMLIN WOULD STOP AT TWO VENUES.  READ ON!

IN THE CONFERENCE, SPEAKERS EXPLORE WHY PEOPLE BUY OBJECTS, ART WORKS AND ANTIQUES. WHAT DO YOU THINK ARE THE DOMINANT REASONS?  HAVE THEY CHANGED OVER THE YEARS FROM A COLLECTOR ZEAL TO ONE MORE FOCUSED ON ART AS AN ALTERNATIVE INVESTMENT?

There will always be collectors but there are an increasing number of other groups buying art, including those looking to make alternative investments.  The internet has made the art market accessible to all and more and more businesses are ready to provide services which will help buyers make informed choices. 

Such examples recently highlighted at the NY conference in April, were The Magnus App, which works like Shazam for art, founded by art market economist and entrepreneur Magnus Resch, is a good example of the art world accommodating the consumer.  Jennifer Deason, Executive Vice President, Global Head of Strategy & Corporate Development at Sotheby’s made some fascinating insights on Taste Profiling in the Art Market in her closing address.  Art is evocative and inspiring – there will always be buyers – but understanding their needs and educating them will only help to broaden the buying market and this is key.

WHAT ARE THE CURRENT REGULATIONS THAT GOVERN THE ACQUISITIONS IN THE UK AND THE US AND HOW DO YOU ANTICIPATE THEY MIGHT CHANGE? WILL THEY LOOSEN OR TIGHTEN IN THE NEAR FUTURE?

Wow tough question! And as I am not an expert on this, I consult with the conference legal and tax & accounting sponsors who are best placed to advise on this.  In fact, there was just a session on Anti-Money Laundering at the London conference on Tuesday. I also consult with the heads of the Trade Associations to see how we can best to shape presentations to make them relevant and useful for art businesses.

GLOBALIZATION MAKES IT IMPERATIVE THAT WE CAN TRADE INTERNATIONALLY IN ART AND ANTIQUES. WHAT ARE SOME OF THE ISSUES IN TERMS OF BREXIT AND U.S TARIFFS?

Leslie, I think you might have just offered me a topic for the NY Conference in 2019?  As it’s something I can’t answer….perhaps we should include this next year?

LVR: AND ALSO THE TOPIC OF US AND CHINA TARIFFS AND HOW THEY ARE AFFECTING THE ART MARKET! I’D LOVE A PANEL ON THAT.

THE PRACTICAL ASPECTS OF THE ART MARKET, THE INSURANCE, THE SHIPPING, THE TRANSPORT, ARE CRUCIAL TO THE BUSINESS? HOW DO YOU DETERMINE THE BEST PEOPLE IN EACH OF THESE AREAS OF THE INDUSTRY TO SPEAK AT THE CONFERENCE.

My years at The Art Newspaper certainly helped provide me with a nice list of contacts, but there are also a number of trade associations in the Art Market whose members all have to adhere to strict guidelines of best practice.  Many of our speakers are members of these associations including APAA, PAIAM and CINOA.

IN APRIL 2018, THE ART BUSINESS CONFERENCE IN NEW YORK INCLUDED THE FOLLOWING TOPICS, SUPPORTED BY KNOWLEDGEABLE SPEAKERS IN EACH FIELD.

Art Market Principles and Best Practices

This session opened with a presentation by Noah Horowitz, Director of Art Basel Americas, who defined these sets of principles and their implications for exhibitors. This was followed by a panel discussion exploring the codes of conduct and best practices that already exist in the US art market and looked at what can be done to improve standards in the industry for the future. 

Protecting an Artist’s Legacy

This session offered practical advice for artists’ estates and foundations and explored how technology is working to support artists and their estates. 

Traveling Exhibitions

This session explored the planning process behind travelling exhibitions from the museum perspective, discussed changing trends and how technology is assisting the evolution of travelling exhibitions globally.  The panel also examined best practice when loaning to traveling exhibitions focusing on insurance and contracts.  

The Future of Collecting

How will the next generation collect Art, Antiques and Collectables?  

Cybercriminals in the art world

This interactive workshop offered guidance on proactive measures art businesses can take to protect themselves and covered the following areas: the Human Firewall – training staff to detect and respond appropriately to threats, invoice fraud, password hygiene, shadow IT. Plus GDPR – the largest shake-up in data protection for 20 years, and what it means for US art organisations.

DO YOU FORESEE THE GROWTH OF THE ART BUSINESS CONFERENCE TO INCLUDE HONG KONG, OR SHANGHAI OR ANY OTHER INTERNATIONAL SITES?

Yes absolutely, I am working on developing the conference in the Asia for 2019.

IT IS WONDERFUL WHEN SOMEONE DILIGENT AND COMMITTED HAS THE INSIGHT TO OFFER A WONDERFUL PROGRAM AND THE FORTITUDE TO EXPAND IT FIRST TO NEW YORK AND THEN TO ASIA. HATS OFF, LOUISE! I ADMIRE YOU AND THE ART BUSINESS CONFERENCES ENORMOUSLY AND LOOK FORWARD TO SEEING YOU IN NEW YORK IN APRIL.

SO MANY THANKS FOR YOUR GREAT CONTRIBUTION TO THE LRFA BLOG!

 

IN OUR NEXT POST THE LRFA BLOG IS DELIGHTED TO INTRODUCE DEBRA FORCE, PRESIDENT OF DEBRA FORCE FINE ARTS. DURING A TImE WHEN CONTEMPORARY ART DOMINATES THE MARKET, DEBRA HAS COMMITTED HER PROFESSIONAL LIFE TO THE MASTERWORKS OF EARLY AMERICAN ART. HER EXPERIENCE IN THE ART WORLD IS VAST, RANGING FROM MANAGING A DISTINGUISHED CORPORATE COLLECTION TO HEADING CHRISTIE’S AMERICAN PAINTING DEPARTMENT TO OPENING HER OWN GALLERY. THE CONSTANT IN EACH AND EVERY ONE OF THESE POSITIONS IS HER KNOWLEDGE AND COMMITMENT TO AMERICAN ART AND HER ENTHUSIASM IN SHARING IT WITH US.

I LOOK FORWARD TO SHARING DEBRA’S VAST KNOWLEDGE AND INTELLIGENCE WITH YOU.

London September 4th, The Art Business Conference continues to grow both in attendance and relevance

 

IN A RECENT PODCAST PRODUCED BY ART AGENCY, PARTNERS, AN ALWAYS INFORMATIVE AND LIVELY FORUM, CHRISSIE ILES FROM THE WHITNEY MUSEUM, CAROLYN RAMO FROM ARTADIA, AND HAMAZA WALKER FROM LAXART, JOINED THE ARTICULATE EDITOR OF IN OTHER WORDS, CHARLOTTE BURNS, TO DISCUSS “ART ACROSS AMERICA”. THEY POSED THE VERY RELEVANT QUESTION OF WHERE GREAT ART IS BEING MADE IN AMERICA TODAY.  THERE IS A GREAT DEAL OF CONVERSATION IN THE ART WORLD NOT ONLY ABOUT THE GLOBALIZATION OF THE ART MARKET (OLD NEWS) BUT ALSO ABOUT THE EXCELLENT QUALITY OF ART BEING MADE THROUGHOUT THE UNITED STATES OUTSIDE OF THE MAJOR MARKET HUBS AND THE INCREASING SUPPORT BY COLLECTORS AND CURATORS OF THE INNOVATIVE ART OF THE REGIONS.

IT IS NO SURPRISE, THEREFORE, THAT LOUISE HAMLIN, FOUNDER AND ORGANIZER OF THE UNIQUE ART BUSINESS CONFERENCE HAS FOCUSED ON THIS SUBJECT FROM THE PERSPECTIVE OF THE MOST POPULAR AND TALKED ABOUT TOPIC OF ALL, THE ART FAIR.  THE NEXT ART BUSINESS CONFERENCE THAT TAKES PLACE IN LONDON ON SEPTEMBER 4th AT THE CHURCH HOUSE CONFERENCE CENTER IN WESTMINSTER, LONDON, GATHERS TOGETHER SENIOR ART MARKET PROFESSIONALS, GALLERISTS, ADVISORS, LEGAL EXPERTS, ART FAIR DIRECTORS AND COLLECTORS. EACH YEAR IT BECOMEs MORE AND MORE POPULAR AND CONTINUES TO GROW BOTH WITH AN INCREASE IN ATTENDANCE AND AN AGENDA FILLED WITH FIERCELY KNOWLEDGEABLE EXPERTS IN EVERY AREA OF THE ART MARKET.

http://www.artagencypartners.com/podcast/art-across-america-with-chrissie-iles-carolyn-ramo-and-hamza-walker/

http://www.theartbusinessconference.com/home

THE LRFA BLOG AND LOUISE, AFTER OUR “LUNCH BREAK” AND A CHANCE TO LEARN ABOUT LOUISE’S PROFESSIONAL HISTORY IN THE ART WORLD AND THE HISTORY OF THE CONFERENCE, WILL RESUME THE AGENDA FOR THE FORTHCOMING CONFERENCE.

13.00 – 14.00: Lunchtime discussion tables and buffet lunch served in the Business Pavilion and Media Pavilions sponsored by Richard Nicholson, Willis Towers Watson 

Dirk Boll
President, Christie’s EMERI

THE FIRST TOPIC WILL ADDRESS THE CURRENT MARKET, AND THE SURGE OF ONLINE AUCTION PURCHASES IN THE DECORATIVE ARTS WITH THE PRESIDENT OF CHRISTIE’S EMERI. THE COLLECTION OF PEGGY AND DAVID ROCKEFELLER AT CHRISTIE’S IS A WONDERFUL EXAMPLE OF THE WAY THE AUCTION HOUSE HAS USED BOTH LIVE AND ONLINE AUCTIONS TO THEIR ADVANTAGE AND TO ACHIEVE ASTONISHING RESULTS FOR THE ROCKEFELLER ESTATE NOT ONLY WITH THE MASTERPIECES OF FINE ART BUT ALSO WITH THE ENORMOUS CUMULATIVE COLLECTION OF DECORATIVE ARTS AND FURNITURE INHERITED AND WELL AS COLLECTED BY PEGGY AND DAVID ROCKEFELLER.

14.00 – 14.20: Why brown is the new black?  Whether new audiences coming to auctions online, or a re-birth for the decorative arts sector, there are exciting developments impacting the way in which people are engaging with collecting today. Christie’s has been instrumental in shaping opinions and influencing a new appreciation for heirlooms in recent months.  As tastes evolve, Dirk Boll, President of Christies’s EMERI, discusses current trends and shares predictions for the future of collecting with Anna Brady (The Art Newspaper).

Anna Brady
The Art Newspaper

FROM THE RENOVATION AT THE FRICK TO THE COSTUME INSTITUTE AT THE MET, AND THOSE ARE ONLY IN NEW YORK, THE TOPIC OF REVENUE OPPORTUNITIES FOR MUSEUMS IN THE 21st CENTURY IS NOT ONLY RELEVANT BUT CRUCIAL. LOUISE HAS JOINED TOGETHER AN ESTEEMED PANEL OF INTERNATIONAL MUSEUM CURATORS TO EXPLORE THIS SUBJECT.

14.20 – 15.20: The Entrepreneurial Museum: With contributions from the Royal Academy of Arts, the Van Gogh Museum and the National Portrait Gallery, this international panel will explore, in the wake of funding cuts, what are the new revenue opportunities for museums?  This will also explore how museums are working more closely with the art trade together with a focus on travelling exhibitions, with new data and research on the growth of the travelling exhibitions market globally.  Speakers: Charles Saumerez Smith (Royal Academy), Jessica Litwin  (National Portrait Gallery), Milou Halbesma (Van Gogh Museum), Louise Steward  (National Portrait Gallery),  Bernardine Brocker Wieder (Vastari) and moderated by Jane Morris (Culture Shock Media & The Art Newspaper).

Milou Halbesma
Director Public Affairs
Van Gogh Museum

AS THE VALUE OF ART HAS INCREASED AND THE NUMBER OF COLLECTORS, NASCENT AND ESTABLISHED, CONTINUES TO GROW, THE ISSUE LEGAL RIGHTS AND SOLUTIONS AFFECTS EVERYONE INVOLVED IN THE BUSINESS OF ART.

Adrian Parkhouse
Farrer & Co
Chair, Art & Heritage Group

15.20 – 16.20: Comparative Art Law: Arbitrate, Mediate or Litigate? This session brings together a panel of art law experts from the UK and Germany to explore a series of art law cases and possible art law solutions, whether through arbitration, mediation or litigation. Speakers: Nicola Wallace (4 Paper Buildings), Richard Edwards QC  (3 Verulam Buildings), Friederike Grafin von Bruhl (K&L Gates) and moderated by Adrian Parkhouse  (Farrer & Co)

16.20 – 16.40: Refreshment break in the Business Pavilion and Media Lounge 

James Green
David Zwirner Gallery

THE CHANGES IN THE ART FAIR AND THE INVOLVEMENT IN LOCAL COMMUNITIES AND CHALLENGING SOCIAL AND POLITICAL TIMES WILL CLOSE THIS CONFERENCE.

16.40 – 17.40:  The Evolving Art Fair. This panel discussion will explore how art fairs are evolving into new geographical areas, working with local communities and also working in some challenging political/economic climates.  Our panellists will discuss the question of market saturation of the art fair model and the session will ultimately explore the insights and dynamics of the art fair business model and all that is involved in putting together a successful art fair. Speakers: Jagdip Jagpal  (India Art Fair), Touria El Glaoui  (1:54), James Green  (David Zwirner) and Kamiar Maleki (Contemporary Istanbul), moderated by Melanie Gerlis  (Financial Times)  

17:40: Closing address

18.00 – 19.00: Evening networking drinks in the Business Pavilion and Media lounge 

19.00: Conference close


IN OUR NEXT LRFA BLOG, WE LOOK FORWARD TO RESUMING OUR INTERVIEW WITH LOUISE HAMLIN, FOUNDER OF THE ART BUSINESS CONFERENCE, ON ALL OF THESE TOPICS AND MORE.

PLEASE JOIN US!

 

A force for good: The Art Business Conference with founder Louise Hamlin

Louise Hamlin
Founder and Director
The Art Business Conference

ART CONFERENCES AND PANELS ABOUND, USUALLY HELD IN CONJUNCTION WITH AN ART FAIR, OR A MUSEUM ASSOCIATION OR ACADEMIC GATHERING SUCH AS THE COLLEGE ART ASSOCIATION WHICH ANNUALLY BRINGS TOGETHER SCHOLARS IN THE FIELD OR CONVERSATIONS AT MIAMI ART BASEL WHICH FEATURES PANEL DISCUSSIONS WITH LEADING ARTISTS, COLLECTORS AND GALLERISTS.

THE ART BUSINESS CONFERENCE, HOWEVER, IS UNIQUE IN ADDRESSING THE CONCERNS OF EVERY ASPECT OF THE ARTS FROM A BUSINESS PERSPECTIVE. LEADING LAWYERS WHO SPECIALIZE IN INTERNATIONAL ART AND CULTURAL PROPERTY ISSUES, HEADS OF ARTIST ESTATE FOUNDATIONS, GLOBAL INSURANCE BROKERS, INTERNATIONAL ART SHIPPING AND TRANSPORT EXPERTS, FOUNDERS OF INTERNET ART PLATFORMS SUCH AS ARTSY, ART FAIR ORGANIZERS SUCH AS THE DISTINGUISHED CHAIRMAN OF MASTERPIECE, LONDON SERVE ON PANELS ORGANIZED BY FOUNDER AND DIRECTOR, LOUISE HAMLIN, AND ADDRESS THE TOPICS THAT CONCERN EVERYONE IN THE ART WORLD. THE DISCUSSIONS, BOTH PROVOCATIVE AND EDUCATIONAL, AND NETWORKING OPPORTUNITIES KEEP US INFORMED AND CURRENT ON THE BUSINESS OF ART.

ARCIS

THE LRFA BLOG IS DELIGHTED TO WELCOME LOUISE HAMLIN, FOUNDER OF THE ART BUSINESS CONFERENCE AND ART MARKET MINDS.

THE ART BUSINESS CONFERENCE IS AN EXTRAORDINARY PLATFORM TO GAIN EXPERTISE IN EVERY ASPECT OF THE BUSINESS OF ART FROM EXPERT PANELISTS GATHERED TOGETHER  BY LOUISE HAMLIN, FOUNDER AND DIRECTOR. INITIATED IN LONDON IN 2014 AND HELD IN NEW YORK AS WELL FOR THE LAST TWO YEARS, IT IS THE LEADING FORUM TO DISCUSS THE KEY ISSUES THAT CONCERN OUR GLOBAL ART MARKET. THE ROSTER OF KEYNOTE SPEAKERS AND THE SUBJECTS UNDER DISCUSSION ARE TIMELY, INFORMATIVE AND INVALUABLE IN PROVIDING INSIGHT FOR RUNNING AN ART BUSINESS OR FOR COLLECTING WITH SKILL AND INSIGHT.

LOUISE, THANK YOU SO MUCH FOR TAKING TIME FROM YOUR VERY BUSY SCHEDULE TO CONTRIBUTE TO THE LRFA BLOG.

WHAT IS YOUR PROFESSIONAL BACKGROUND IN THE ARTS? WHAT WAS YOUR CAREER PATH PRIOR TO ORGANIZING THE ART BUSINESS CONFERENCES IN LONDON AND NEW YORK?

I studied History of Art at the Courtauld Institute and worked for The Art Newspaper for 14 years, ultimately as Head of Sales, before starting Art Market Minds in 2014, the business behind the Art Business Conference.  My whole career has been in the Art world and I have been lucky enough to work with a great many people from a wide variety of businesses within it.

HOW DOES THE ART BUSINESS CONFERENCE SUPPORT AND ADD TO THE BUSINESS OF THE PROFESSIONALS THAT ATTEND?

The professionals who attend the conference come from a broad range of businesses across the art market.  The conference provides the opportunity not just to learn about different issues in the market but hopefully offers practical insight and guidance to art businesses and those running an art collection today.  It is also a good opportunity for delegates to meet with one another, network, and actively tap into each others’ expertise.

WHO IS THE TARGET AUDIENCE AND WHAT IS THE MAIN FOCUS OF THE CONFERENCE?

Senior Art Market professionals are the target audience but the conference is open to anyone who works or is interested in working in the Art Market.  The main focus of the conference is to bring together art market professionals to discuss the key issues affecting the global art world and to share insights. All our delegates are busy working professionals, so we have to offer something that not only educates but provides plenty of opportunities to network. 

Protecting the Artist’s Legacy
Art Business Conference

FOR THE GALLERY OWNER, PRIVATE DEALER OR ADVISOR, WHAT ARE TOPICS OF SPECIAL INTEREST?

You have highlighted right there the diverse range of people who work in the Art Market but my hope is that the areas of special interest we cover have broad appeal: whether a gallery owner or an advisor, listening to, and meeting with, specialist service providers including lawyers, insurers and curators,  shippers, art storage providers and IT security experts, will be at the very least, thought-provoking and at best, inspire best practice across the art market.

FOR THE COLLECTOR, WHAT ARE SOME OF THE HIGHLIGHTS OF THE CONFERENCE?

The conference wants to be a force for good in today’s art market. When the art trade is covered in the press, it is more often covering negative stories. The conference aims to promote best practice in the industry and hopefully this sends a positive message to collectors or new investors in art. There are also practical aspects the conference offers for collectors, as we have a number of exhibitors in our Business Pavilion in both London and New York who offer services to the collector.  In New York 2018, there was Sandra Liotus Lighting Design, offering bespoke lighting solutions for all kinds of delicate art work; the Art Loss Register which can provide full searches on works of art; Veevart and Synergy Associates that build secure IT platforms for data and collection management.

Stolen: The Gallery of Missing Masterpieces
Julian Radcliffe, the head of the Art Loss Register in London, has been the consultant adviser on this important project.

IN OUR NEXT LRFA BLOG, LOUISE WILL DETAIL THE FORTHCOMING 5th LONDON ART BUSINESS CONFERENCE ON SEPTEMBER 4, 2018, AT THE CHURCH HOUSE CONFERENCE CENTRE, WESTMINSTER, LONDON.

BOOK YOUR RESERVATION NOW!

Another of life’s certainties: Art and Taxes, with legal art expert Diana Wierbicki

Sotheby's New York November 2016 Evening Sale

Sotheby’s New York
November 2016 Evening Sale

DESPITE THE TREPIDATION THAT FACED THE NEW YORK AUCTION HOUSES IN ANTICIPATION OF LAST WEEK’S NEW YORK NOVEMBER AUCTIONS, THE RESULTS WERE REASSURINGLY STABLE. QUALITY WON AND ALTHOUGH A MORE JUDICIOUS AND CAUTIOUS ATTITUDE PERVADED THE SALES ROOMS, AT THE SAME TIME, RECORD PRICES WERE ESTABLISHED IN IMPRESSIONIST, MODERN AND CONTEMPORARY SECTORS.

Claude Monet (1840-1926) Meule signed and dated 'Claude Monet 91' (lower left) oil on canvas 28 5/8 x 36 ¼ in. (72.7 x 92.1 cm.) Painted in 1891

Claude Monet (1840-1926)
Meule
signed and dated ‘Claude Monet 91’ (lower left)
oil on canvas
28 5/8 x 36 ¼ in. (72.7 x 92.1 cm.)
Painted in 1891

A NEW WORLD AUCTION RECORD FOR CLAUDE MONET’S GREAT WORK FROM THE GRAINSTACK SERIES WAS ESTABLISHED AT $81 MiLLION AND KANDINSKY’S 1935 OIL REALIZED SLIGHTED OVER $23 MILLION. AT SOTHEBY’S CONTEMPORARY EVENING SALE, GERHARD RICHTER’S A B, STILL TRIUMPHED AT $34 MILLION AND A NEW RECORD PRICE OF $11.7 MILLION WAS ESTABLISHED FOR ARTIST DAVID HOCKNEY’S MONUMENTAL WOLDGATE WOODS, 24, 25, and 26, OCTOBER 2006. 

AS THE ART MARKET CONTINUES TO HOLD SWAY AND RECORD PRICES ARE REALIZED AT AUCTION, THE PRACTICE AND FOCUSED SERVICES OF LAWYERS EXPERIENCED IN ART LAW, THE ART AND AUCTION MARKET AND MUSEUMS AND ART FOUNDATIONS HAVE GROWN IN GEOMETRIC PROGRESSION.

AS ALL PARTICIPANTS IN THE ART MARKET FACE ART SPECIFIC ISSUES OF OWNERSHIP, THIS TIMELY ARTICLE BY FORBES’ GUEST EXPERTS DIANA WIERBICKI AND SETH COHEN OF WITHERS BERGMAN FOCUSES ON THE TAX CONSIDERATIONS AND CONSEQUENCES OF THE ACQUISITION AND DEACCESSION AND ESTATE PLANNING OF ART IN THE UNITED STATES.

Wassily Kandinsky (1866-1944), Rigide et Courbé, 1935. Oil and sand on canvas. 44⅞ x 63⅞ in Estimate: $18,000,000-25,000,000.

Wassily Kandinsky (1866-1944), Rigide et Courbé, 1935.
Oil and sand on canvas. 44⅞ x 63⅞ in
Estimate: $18,000,000-25,000,000.

PART II

Timeframe for Resale

A factor generally reviewed by NYS when determining whether a purchaser is a reseller (vs. a collector or investor) is the amount of time it takes for the purchaser to resell the art. This is a challenging factor for sellers of art because art that is fresh to the market generally garners higher prices. For art to appreciate enough to result in a profitable resale, it cannot be sold immediately after purchase. Therefore, the turnover of items for resale in the art market is not analogous to the timing of resale in other markets. This is at odds with the traditional notion that the longer an item is owned, the more it looks like investment property instead of inventory for resale, and suggests that NYS should be analyzing the resale timing in the context of the art market structure. That being said, there is no guarantee that NYS will take art market nuances into account when applying their general rules. In case of an audit or investigation, it is advisable to highlight art industry differences as a way to counterbalance the importance of this factor. Since the determination as to being a reseller looks at all relevant facts and circumstances, it is prudent that a putative reseller with long periods between sales ensure that the other factors be legitimately in the reseller’s favor.

Gerhard Richter B. 1932 A B, STILL, 1986 oil on canvas 88 1/2 by 78 3/4 in. 224.8 by 200 cm.

Gerhard Richter
B. 1932
A B, STILL, 1986
oil on canvas
88 1/2 by 78 3/4 in. 224.8 by 200 cm.

A few of those factors are: (i) whether the purchaser maintains a gallery or specific place of business; (ii) whether the purchaser is an expert in the applicable area of art; (iii) whether the purchaser has employees; and (iv) how the purchaser reports and treats the income derived from sales (i.e., a purchaser cannot have it both ways – by claiming reseller status, while treating the income from sales as investment income subject to capital gains rates). In other words, a reseller operates a business and the more that business acts like a business, the greater the chance that it will survive unscathed by any NYS scrutiny. If investigated by NYS, having complete documentation as to these factors is key as many an investigator or auditor has been swayed by both the information contained in the documentation and the propositions for which they stand.

David Hockney WOLDGATE WOODS, 24, 25, AND 26 OCTOBER 2006 oil on canvas, in six parts overall: 72 by 144 in. 182.9 by 365.7 cm.

David Hockney
WOLDGATE WOODS, 24, 25, AND 26 OCTOBER 2006
oil on canvas, in six parts
overall: 72 by 144 in. 182.9 by 365.7 cm.

Selling Art off the Walls of a Home

There may be a valid business reason for displaying art in a personal residence, but by doing so, you invite a struggle with NYS. For example, a reseller’s home may be a great place to display art during orchestrated gatherings with potential buyers to show clients what the art looks like in a home environment. Nonetheless, despite valid reasons for home displays, NYS will highly scrutinize them and, to be frank, NYS is not without justification. NYS has the understandable view that a home display carries with it the purpose of personal use, namely the enjoyment of the art. This is not to say that home display is an automatic disqualifier, but a reseller argument where there is home display will likely be an uphill battle with investigators given their assumption that the reseller exemption is inapplicable. We note that, in some cases, having an area within the home used solely for business purposes has proved successful in defending against taxes and penalties in an audit and subsequent litigation.

 

Guest post by Diana Wierbicki and Seth Cohen, FORBES , May 10, 2016, in Janet Novak: Taxing Matters 
Diana Wierbicki is global head of art law and Seth Cohen is a partner specializing in tax controversies at Withers Bergman.

AND NOW, A WEEKEND OF FAMILY, FRIENDS, FOOTBALL, AND FOR SOME INCORRIGIBLE FEW, FITNESS! HAPPY THANKSGIVING FROM THE LRFA BLOG!

Wayne Thiebaud Turkey Dinner For the cover of the New Yorker November 21, 2011

Wayne Thiebaud
Turkey Dinner
For the cover of the New Yorker
November 21, 2011

Art, a taxable commodity, with legal expert Diana Wierbicki

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AS YOU BUY OR SELL A WORK OF ART, STAYING OUT OF TAX TROUBLE IS AS IMPORTANT A CONSIDERATION AS THE PROVENANCE, CONDITION AND PERIOD OF THE WORK.  SINCE ART HAS BECOME A GLOBAL, MULTI-BILLION DOLLAR INDUSTRY, AND HAS BECOME A SIGNIFICANT CONTRIBUTOR TO A STATE’S TAX COFFERS, PARTICULARLY NEW YORK STATE, ART DEALERS AND COLLECTORS HAVE BECOME THE FOCUS OF SCRUTINY BY STATE  TAX AUTHORITIES. IN THIS VIGOROUS INTERNATIONAL MARKET, ALLEGATIONS HAVE SURFACED THAT ART TRANSACTIONS ARE SOMETIMES A MEANS TO LAUNDER MONEY AND AVOID TAXES.

AS NOVEMBER IS AUCTION MONTH IN NEW YORK AND WE ARE RAPIDLY APPROACHING MIAMI ART BASEL, A SPECTACULAR NUMBER OF WORKS SPANNING IMPRESSIONIST, MODERN, POST-WAR, CONTEMPORARY, LATIN AMERICAN AND AMERICAN WORKS OF ART WILL EXCHANGE HANDS. THE LRFA BLOG PRESENTS THIS TIMELY CONTRIBUTION TO FORBES MAGAZINE, POSTED IN MAY 2016, BY ESTEEMED LEGAL EXPERTS, DIANA WIERBICKI AND SETH COHEN OF WITHERS BERGMAN. DIANA WIERBICKI IS GLOBAL HEAD OF ART LAW AND SETH COHEN IS A PARTNER SPECAILIZING IN TAX CONTROVERSIES AT WITHERS BERGMAN.

Guest post by Diana Wierbicki and Seth Cohen, FORBES , May 10, 2016, in Janet Novak: Taxing Matters 

Given that the art market is a multi-billion dollar industry and that so many of the world’s art sales and purchases take place in New York State (at record breaking prices), it is no wonder that cash-strapped state authorities are broadly searching for instances of tax evasion in the art world. We are seeing a tremendous increase in audits and investigations in this area and two recent settlements show the investigations are resulting in the payment of millions of dollars to the state. With results this profitable, it is likely that NYS investigations of art transactions will continue.

NYS is currently focusing on the use of resale certificates (which exempt a purchase from sales tax) in connection with art purchases. Under New York’s tax law, items purchased for resale must not be used for any other purpose, meaning personal enjoyment is a prohibited use. A person need not have the intent to evade a tax to be in violation of this law and may innocently fail to comply with the law simply by not knowing its complicated rules. Bottom line? This type of mistake can be costly and, in an industry where reputation is key, serious damage can be inflicted on an otherwise pristine reputation.

New York Attorney General Eric Schneiderman is on the hunt for tax abuses in the art world. (Photo by Eduardo Munoz Alvarez/Getty Images)

New York Attorney General Eric Schneiderman is on the hunt for tax abuses in the art world. (Photo by Eduardo Munoz Alvarez/Getty Images)

On May 3rd of this year, NYS Attorney General Eric Schneiderman released the following statement: “We are committed to rooting out tax abuses wherever we find them, especially in the art world, where the difference can be hundreds of thousands — if not millions — of dollars in lost tax revenue per sale. When art collectors don’t pay their fair share, law abiding New Yorkers should not be stuck footing the bill.” Strong words that are being backed-up with strong action.

 Damien Hirst ‘The Virgin Mother’ Lever House on Park Avenue. Photo Credit: Anthony Moore/Sipa Press

Damien Hirst
‘The Virgin Mother’
Lever House on Park Avenue.
Photo Credit: Anthony Moore/Sipa Press

The two settlements recently in the press involve the well-known real estate investor Aby Rosen and art sales executive Victoria Gelfand. It was reported that they each own companies essentially formed to buy and sell art using resale certificates; they purchased art that was used for something other than resale; and the conditions of their settlements with NYS include future sales and use tax compliance.In Rosen’s case, his companies were used to purchase and commission 200 works of art (all but one of which were acquired with a resale certificate) for a total of $80 million from 2002 through 2015. The art was used for the purpose of Rosen’s enjoyment at his personal residences and to enhance his real estate company’s brand by displaying the art in his offices. According to the Attorney General, Rosen should have paid sales tax on each artwork when purchased or, alternatively, if the art was originally intended to be resold, sales tax should have been paid at the point the use of the art “diverted” to an ineligible use. Rosen settled with NYS for $7 million.

Gelfand used her companies to purchase 30 works of art for a total of $1 million from 2005 through 2013. The settlement was paid only with respect to works that were displayed in her home. Of particular note is the following quote from the Attorney General’s statement: “Art buyers may not avoid sales or use tax simply by claiming that artwork they enjoy at home is intended for resale…that rule is clear, and my office is committed to ensuring the art industry follows it.” Gelfand settled with NYS for $200,000.

The following tips highlight a few important takeaways from these settlements.

Resale Means Exclusively for Resale

The sole purpose and intent of an art purchase must be to resell the art. For example, in P-H Fine Arts Ltd. v. New York State Tax Appeals Tribunal, the taxpayer, Bob Guccioni, purchased artwork to enhance his “image as a publisher,” as well as the image of his business. Consequently, although the taxpayer intended to resell the art, the court denied his resale certificate because reselling was not his sole reason for purchasing the artwork.

IN PART TWO OF THE LRFA BLOG, THE LEGAL DEFINITIONS THAT APPLY TO RESALE OF ARTWORKS IN NEW YORK STATE ARE DEFINED.

 

Diana Wierbicki Senior Partner Withers Bergman

Diana Wierbicki
Senior Partner
Withers Bergman

Guest post by Diana Wierbicki and Seth Cohen, FORBES , May 10, 2016, in Janet Novak: Taxing Matters 
Diana Wierbicki is global head of art law and Seth Cohen is a partner specializing in tax controversies at Withers Bergman.

 

 

A case of fractional art interests with art law expert, Diana Wierbicki, of Withers Bergman

1edb4c41-52b8-4ddb-b8da-3a039863a289.imgJOHN DIZARD, A JOURNALIST AND CONTRIBUTOR TO THE FINANCIAL TIMES, RECENTLY STATED, IN FT’S FEBRUARY 5, 2016 EDITION, THAT THE BUSINESS OF LENDING AGAINST ART HAS NEVER BEEN BETTER. HE DOCUMENTS THE SURGE OF NEW CAPITAL THAT IS TRYING TO GET INTO THE FINANCING OF ART-RELATED PURCHASES AND LOANS. BIG BANKS OFFERS RELATIVELY LOW RATES ON THEIR ART LOANS AND SPECIALIZED LENDERS ARE OFFERING LOANS TO EUROPEAN CLIENTS WHO DO NOT MEET THE CURRENT LENDING STANDARDS OF THE CONTINENT’S BANKS. IN THIS WAY, CASH-SHORT COLLECTORS CAN RAISE MONEY BY BORROWING AGAINST THEIR ART INSTEAD OF SELLING IT AS WE APPROACH A TIME WHEN AUCTION RESULTS ARE BECOMING SIGNIFICANTLY LOWER WITH THE EXCEPTION OF FIRST-TIER OR MUSEUM QUALITY WORKS.

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ESTATE PLANNING FOR HIGH NET WORTH INDIVIDUALS, FAMILIES AND FOUNDATIONS WITH STRONG ART HOLDINGS HAS BECOME INCREASINGLY COMPLEX AND SOPHISTICATED AND THE NUANCES AND INTERPRETATIONS OF ART LAW REQUIRE SPECIALIZATION AND EXPERTISE. THE LRFA BLOG IS DELIGHTED TO SHARE AN ARTICLE BY LEGAL EXPERT, DIANA WIERBICKI, ON FRACTIONAL ART INTERESTS THAT WAS PUBLISHED IN WEALTHMANAGEMENT.COM IN SEPTEMBER 2014.

Diana Wierbicki is a New York-based partner at the international law firm Withers Bergman,  where she focuses on art law dealing with purchases, sales, loans, consignments and charitable giving of works of art. Ms. Wierbicki is also a member of the wealth planning practice group and advises high net worth individuals and their families on tax, trust and estate planning matters, as well as on commercial transactions associated with that planning.

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APPEALS COURT GRANTS SUBSTANTIAL DISCOUNT FOR ART INTERESTS

In Estate of Elkins v. Commissioner, the descendent’s estate gets a $5 million estate tax refund

The U. S. Court of Appeals for the Fifth Circuit reversed the Tax Court’s decision in Estate of Elkins v. Commissioner and increased the discount for the decedent’s fractional art interests, resulting in a $14 million estate tax refund for the decedent’s estate.

The Tax Court had previously rendered an opinion in 2013 granting the Estate of James A. Elkins, Jr. a 10 percent discount from the pro rata fair market value of the decedent’s interests in 64 works of art.  On appeal, the Fifth Circuit disagreed with this nominal percentage and accepted the discounts originally offered at trial by the estate’s expert witnesses, which ranged from 52 percent to 80 percent.  These discounts even exceeded the 44.75 percent discount originally reported on the estate’s return.

Facts

James Elkins and his wife had lived in a community property state.  James survived his wife and died owning a 73 percent interest in 61 works of art and a 50 percent interest in three works of art.  At that time, his children owned the remaining interests in the art.   During James’ life, the art was primarily held in his house or office, and a lease agreement and co-tenants’ agreement with regard to the art existed between him and his children.

When James died in 2006, his children inherited his undivided fractional ownership interests in the art, and his residuary estate passed to a family foundation.  James’ estate tax return applied a 44.75 percent fractional interest discount in valuing James’ art interests, which the Internal Revenue Service denied in its entirety.

Tax Court Ruling

The Tax Court rejected the IRS’ argument that no discount should apply and, instead, valued the decedent’s fractional interests using a hypothetical “willing buyer/willing seller” analysis.  The Tax Court noted that although both parties brought expert witnesses, only the estate introduced evidence as to the appropriate discount amount.  The IRS—committed to its position that the decedent’s interests shouldn’t receive any discount—offered expert testimony that there was no recognized market for the sale of such interests and failed to argue in the alternative for a specific discount value.

The Tax Court was most influenced by the testimony of one of the decedent’s children.  Relying on the daughter’s statement that she would be willing to pay a “fair price” (meaning one determined by an expert) to keep the art in the family, the Tax Court presumed that all of the decedent’s children would ask for little to no discount.

The Tax Court determined that the fractional interests should only receive a minimal valuation discount of 10 percent for estate tax purposes.  As such, the Tax Court rejected the estate’s suggestion that a hypothetical owner of the decedent’s fractional interests, cognizant of the children’s determination to outlast any third party who attempted to force a sale of the interests, would need to sell the art to the children at a sharply discounted value. Without expert testimony from the IRS analyzing the appropriate discount, the court seemingly picked a percentage discount amount out of thin air.

Higher Discounts Warranted

On appeal, the Fifth Circuit affirmed the Tax Court’s holding that fractional-ownership discounts apply to interests in art.  However, the Fifth Circuit found that the Tax Court’s application of a 10 percent nominal discount was a reversible error, given the absence of any evidence or legal arguments supporting such an amount.

The Fifth Circuit found that the Tax Court’s focus on the children as owners of the fractional interests undermined the objectivity of its “willing buyer/willing seller” analysis.  The Fifth Circuit criticized the Tax Court for not giving sufficient weight to factors that would realistically inform a hypothetical buyer’s or seller’s price.

In addition to considering the children’s resolve in maintaining absolute ownership and possession of the art, the Fifth Circuit revisited the testimony of the estate’s expert witnesses.  The Fifth Circuit agreed with the experts that a potential willing buyer of the decedent’s fractional interests would be aware of the family’s financial strength and sophistication, as well as existing restrictions on selling the interests.  Such factors would outweigh the appeal of a guaranteed “fair price,” and lead a buyer to purchase the interests only at a large discount.  Moreover, the Fifth Circuit observed that the so-called “fair price” that the decedent’s daughter was willing to pay would likely be informed by the same experts as in the present case, whose valuations supported much higher discounts.

Widened Range of Discounts

This was a tremendous win for the estate and has drastically widened the range of discounts for fractional interests in art.  This is a dramatic increase from the 5 percent discount for fractional art interests that was granted in Stone v. United States in 2007.  The Fifth Circuit emphasized that the estate’s evidence on discount valuation was the only evidence on that issue because the IRS was unable to introduce any evidence as to an alternate discount valuation, having failed to do so at trial.  It’s therefore unclear where future discounts for art interests will land within the court-established range if the IRS abandons its no discount argument in the future.

– The author acknowledges Sarah Pickering for her assistance with this article.

Proposed tax code threatens the American collector’s buying power, with legal expert Diana Wierbicki

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LEGAL, PUBLIC POLICY AND ETHICAL ISSUES THAT CONCERN ART DEALERS, AUCTION HOUSES, COLLECTORS AND ALL THOSE WHO MAKE UP THE WORLD OF THE VISUAL ARTS, HAVE GAINED IN INCREASED SIGNIFICANCE AND FOCUS AS THE ART WORLD ITSELF COMMANDS MORE MONETARY AND INTERNATIONAL ATTENTION. HOW THE ART MARKET FUNCTIONS AND THE LEGAL RAMIFICATIONS THAT AFFECT AN ART COLLECTION AND ITS HEIRS AS WELL AS MUSEUM DONATIONS HAS BECOME AN AREA OF SPECIALIZATION AND EXPERTISE WITHIN THE PRACTICE OF LAW.

DIANA WIERBICKI, PARTNER AT THE INTERNATIONAL FIRM OF WITHERS AND BERGMAN, IS  ONE OF THE MOST DISTINGUISHED SPECIALIST IN THIS FIELD AND I AM DELIGHTED TO POST HER ARTICLES ON THE LEGAL ASPECTS OF THE ART WORLD IN THE LRFA BLOG. HER AREAS OF EXPERTISE SERVE TO DOCUMENT HER EXTENSIVE PROFESSIONAL ACCOMPLISHMENTS AND ALSO PROVIDE  US WITH A RICH CROSS-SECTION OF THE COMPLEXITY AND NUANCE OF ART LAW ITSELF.
• Preparing complex like-kind exchange agreements involving works of art.
• Negotiating multi-million dollar sales and purchases by museums, collectors and dealers, and addressing related sales and use tax issues.
• Structuring complex gifts involving works of art.
• Advising on the auction purchases of works breaking record prices.
• Negotiating appraisal and consignment agreements with the major auction houses.
• Negotiating private sale transactions.
• Negotiating loan agreements with over one hundred museums and other institutions around the world.
• Negotiating contracts between collectors and vendors of art-related services.
• Advising major artists and photographers about their estate planning and the formation of foundations to preserve their artistic legacy.
• Advising collectors on their estate planning and the formation of foundations and museums.

DIANA, THANK YOU FOR YOUR GENEROSITY IN SHARING YOUR LEGAL EXPERTISE WITH US IN THE LRFA BLOG.

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The President’s Attack on Like-Kind Exchanges

by Diana Wierbicki

May 6, 2015

The Fiscal Year 2016 Budget proposes a modification of like-kind exchange transactions. As in the Fiscal Year 2015 Budget, the Administration proposes to limit the amount of capital gain deferred under Section 1031 of the Internal Revenue Code from the exchange of real property to $1,000,000 (indexed for inflation) per taxpayer per taxable year. The Administration now also proposes that art and collectibles no longer be eligible for like-kind exchanges. The proposal only applies to like-kind exchanges completed after Dec. 31, 2015.1

How Like-Kind Exchanges Work Now

The current version of IRC Section 1031, which regulates like-kind exchange transactions, provides that in general “no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.”2 There are no current limits on the value of the property. However, limits on the types of property that can be used as part of a like-kind exchange already do exist. A taxpayer can’t use stock in trade or other property held primarily for sale, stocks, bonds, notes, other securities, evidences of indebtedness or interest, interests in a partnership, certificates of trust or beneficial interests or choses in action as part of a like-kind exchange.3

Like-kind exchanges enable a “deferral” of capital gains tax, not an “avoidance” of tax. If an individual purchases art for $100,000 and later sells the art for $150,000 in cash, the individual’s $50,000 gain is recognized and subject to tax. If, instead, the individual reinvests the $150,000 in other art, no gain is recognized on the exchange; therefore, no tax is due at that time. If later, the individual sells the art for $250,000 in cash, gain is recognized on $150,000 (the sale proceeds minus the original cost basis of the first work of art exchanged). The $150,000 will be taxed at the capital gains rate for collectibles in the year that the cash is received. This rate may be the same, higher or lower than that in the year of the exchange, so the individual is taking a gamble when deferring.

Proposal Decreases Buying Power of U.S. Art Investors

If passed, the proposed exclusion of art and collectibles from being used in like-kind exchange transactions would be yet another provision in the tax code that could discourage individuals from investing in art. Gains from the sale of art and collectibles are currently taxed at a 28 percent federal rate, the highest federal tax rate for capital assets held for over a year.4 When factoring in other federal and state taxes that art sales may be subject to, an individual could face an over 40 percent tax on the sale of art. If that individual had sold art for the purpose of reinvesting in other art, the individual would now have 40 percent less cash to reinvest in the art market.

This decrease in buying power could affect the United States’ position in the global art market. The United States is one of the few countries that taxes its citizens on their worldwide income, regardless of where it’s earned. As such, U.S. citizens receive no income tax benefit from conducting art sales in “freeports” (customs zones in which taxes and fees are not charged by the country in which the zone is located) the way that citizens of other countries do. For instance, if a Chinese citizen who’s residing outside of China sells art in a Swiss freeport, the gain from the sale would not be subject to tax because China, unlike the United States, doesn’t tax Chinese citizens on income earned outside of mainland China, and Switzerland doesn’t charge a tax on transactions conducted in its freeports. The Chinese citizen would then have 100 percent of the sale proceeds at his disposal to reinvest in art. The United States does tax U.S. citizens on sales that occur in freeports, so a like-kind exchange serves as an important mechanism to even the global art market’s playing field.

Diana Wierbicki is the Global Head of the Art Law practice at the international law firm Withers Bergman, where she focuses on art law dealing with purchases, sales, loans, consignments and charitable giving of works of art. Ms. Wierbicki is also a member of the wealth planning practice group and advises high net worth individuals and their families on tax, trust and estate planning matters, as well as on commercial transactions associated with that planning.

I LOOK FORWARD TO POSTING ARTICLES WRITTEN BY DIANA IN FUTURE BLOGS.

IN OUR NEXT LRFA BLOG, I AM DELIGHTED TO INTRODUCE JESSICA HODIN, CROWDFUNDING MANAGER AT ART BASEL. JESSICA WILL SHARE HER EXTENSIVE CURATORIAL BACKGROUND AND HER PERSPECTIVE ON ARTISTS OF NOTE IN THE CURRENT CONTEMPORARY SCENE AS WELL AS HER WORK WITH ART BASEL AND ITS SUPPORT OF NONPROFIT ART ORGANIZATIONS AND PROJECTS.

JESSICA IS ARTICULATE AND PERCEPTIVE WITH A WIDE RANGE OF PROFESSIONAL EXPERIENCE THAT INCLUDES ART ADVISORY SERVICES AND ONLINE AUCTION.

THANKS FOR READING!

Diana Wierbicki, art law expert and partner at Withers Bergman, on like-kind exchanges

Diana Wierbicki Senior Partner Withers Bergman

Diana Wierbicki
Senior Partner
Withers Bergman

THE ADVANTAGES OF THE STATE OF DELAWARE AS A SAFE HARBOR FOR ART COLLECTORS BECAUSE OF THE STATE’S TAX LAWS  HEADLINED THE ARTS SECTION OF MONDAY’S NEW YORK TIMES. MANY OF THE MOST WELL-KNOWN INTERNATIONAL ART TRANSPORT FIRMS SUCH AS DIETL INTERNATIONAL, CROZIER FINE ARTS AND ATELIER ARE OPENING LARGE-SCALED, HIGHLY SOPHISTICATED TEMPERATURE-CONTROLLED ART STORAGE COMPLEXES, RANGING FROM 40,000 – 60,000 SQUARE FEET, IN DELAWARE BECAUSE OF THE TRUST AND TAX ADVANTAGES THE STATE OFFERS TO COLLECTORS. AS ART CONTINUES TO GAIN MOMENTUM AS AN ALTERNATIVE INVESTMENT, THE APPEAL OF STORING IT TAX FREE ON U.S. SOIL IS YET ANOTHER INDICATOR OF THE GROWTH AND SOPHISTICATION OF OUR GLOBAL ART MARKET.

IN THE TIMES ARTICLE, DIANA WIERBICKI, WHO HEADS THE GLOBAL ART PRACTICE AT THE INTERNATIONAL LAW FIRM OF WITHERS BERGMAN IS QUOTED. IT IS AN HONOR AND A PRIVILEGE TO INTRODUCE DIANA TO THE LRFA BLOG. DIANA HAS GENEROUSLY AGREED TO SHARE HER LIVELY AND INFORMATIVE ARTICLES ON ART LAW WITH US.  TODAY SHE WILL INFORM US ON LIKE-KIND EXCHANGES AND ITS TAX IMPLICATIONS.

DIANA WIERBICKI IS A NEW YORK-BASED PARTNER AT THE INTERNATIONAL LAW FIRM WITHERS BERGMAN WHERE SHE FOCUSES ON ART LAW DEALING WITH PURCHASES, SALES, LOANS, CONSIGNMENTS AND CHARITABLE GIVING OF WORKS OF ART. MS. WIERBICKI IS ALSO A MEMBER OF THE WEALTH PLANNING PRACTICE GROUP AND ADVISES HIGH NET WORTH INDIVIDUALS AND THEIR FAMILIES ON TAX, TRUST AND ESTATE PLANNING MATTERS, AS WELL AS ON COMMERCIAL TRANSACTIONS ASSOCIATED WITH THAT PLANNING.

 

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THE HIGH TAXES ON ART PURCHASES MIGHT SURPRISE YOU

Here’s how to lower that extra, hidden cost

By Diana Wierbicki

Crain’s Wealth, July 2014.

Art sales at the Christie’s post-war and contemporary evening sale’s hit a record-breaking auction total of approximately $745 million. Such prices, as well as an increase in international art fairs and Internet purchase options, have attracted new investors to the art market in hopes of making a profit from art investments.

However, new investors, as well as many seasoned art investors, may be surprised to find a hefty tax bill resulting from the sale of their art. In 2014, the federal tax rate on gains from the sale of artwork is at a combined maximum rate of up to 31.8%, with a capital gains rate on collectibles of 28% and a 3.8% tax on investment income for certain individuals. Sellers may also be subject to additional state and local taxes on the gains from the sale of artwork. Internal Revenue Code Section 1031 like-kind exchanges present an attractive opportunity for art investors to defer capital gains recognition on art sales and not be subject to state sales tax on certain art purchases.

Investors in real estate may already be familiar with like-kind exchanges, where real estate assets are swapped and capital gain recognition is deferred. Rather than recognizing the capital gains on the sale of an appreciated asset, the tax basis from the asset that is sold is transferred to the asset that is purchased, and the capital gains tax liability is deferred until the purchased asset is sold in the future.

However, like-kind exchanges with tangible personal property, such as art, have additional considerations with respect to sales tax issues and issues relating to the unique transactional culture of the art world that art investors should be aware of. If an art investor finds a qualified company, such as a gallery, to take ownership of the art for a brief time during the transaction, the investor may save significantly on sales taxes.

TREATMENT IN NEW YORK

When calculating the total purchase price subject to sales tax, many states, such as New York, exclude trade-in credits for any tangible personal property accepted as part payment by a vendor on the purchase of tangible personal property. Therefore, in states with such a trade-in credit, if a taxpayer exchanges art worth equal to or greater value than art the taxpayer purchased, and a vendor is used as the qualified intermediary, the taxpayer should not be subject to any state sales taxes on the art purchased. If done properly, this could result in a sales tax savings of up to 8.875% of the value of the art purchased in New York.

This sales tax exception is often overlooked by qualified companies that serve as intermediaries for real estate like-kind exchanges. Standard documents for real estate like-kind exchanges will not enable a taxpayer to take advantage of this sales tax exclusion because typically qualified intermediary companies do not take title to the art being purchased and sold, and they may not qualify as a vendor for sales tax purposes. Taxpayers seeking to achieve this sales tax benefit, in addition to the capital gains deferral benefit, should discuss with their attorneys how to properly structure the transaction to achieve both benefits.

SELECTING A QUALIFIED INTERMEDIARY

For the sales tax reason discussed above and for the notice requirement reason discussed below, many qualified intermediaries companies that are wise choices for real estate like-kind exchanges may not necessarily be the right fit for art like-kind exchanges.

For liability protection, qualified intermediary companies often refuse to take title to the property in the exchange and title will pass directly from the seller to the buyer, rather than through the intermediary. These arrangements in which the qualified intermediary does not enter the chain of title involve safe harbor notice requirements. As a result, if used in an art exchange, to meet the literal reading of the safe harbor, some qualified intermediaries will require an auction house or gallery consigned to sell the art to provide notice of the exchange arrangement to the third-party buyer. Many auction houses and galleries are displeased with having to provide this notice, and if midway through a taxpayer’s exchange they do not comply and the qualified intermediary refuses to take title to the art being exchange, the like-kind exchange may fail.

Smaller qualified intermediary companies with more flexible compliance structures or art dealers who understand the complexity of the art market may be more willing to serve as qualified intermediaries in a manner that does not disturb the privacy valued in most art transactions. It is important to properly evaluate the qualified intermediary selection before beginning an art like-kind exchanges to ensure that the taxpayer achieves the greatest tax benefit from the exchange.

Crain’s Wealth is a site dedicated to providing financial news and perspectives for sophisticated individual investors. to spur professional conversation among high-level investors on all things related to wealth management.

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