PxlDan

The Wall Street Journal ran an article today that attempts to answer questions concerning the seemingly unfair tax deductions available to an art investor/collector vs. the artist when work is donated to public museum. The article "Is Art an Industry or a Luxury?" was written by Daniel Grant. Mr Grant is the Author of "The Business of Being an Artist" which is undoubtedly the best book (of the few) written for the artist which details all aspects of the industry. It is an excellent read for the artist on the verge of a professional career and fills in most of the business gaps that an art education does not. The Wall Street article covers the tax law issues that effect the industry today.

"Here's the longest-playing drama: After a 1969 change in the tax law, artists, writers and composers could deduct only the cost of materials when donating their work to museums, libraries and other nonprofit institutions. In every Congress since 1970, there has been a bill to allow these creative types to take a full fair-market-value deduction on their taxes for their gifts. Museum directors bellow that the disincentive has made artists unwilling to donate their work, thus depriving the public of access to it."

The article explains the issue in detail by looking at the concerns of the collector as well; namely a high 28% capital-gains tax for the sale of art and the restrictions of fractional gift donations.

"In effect, reducing the capital-gains tax rate would be a gift to the wealthy that doesn't add anything to the overall economy. Mr. Burman, director of the Tax Policy Center of the Urban Institute,  opposes changes to the law on fractional gifts for the same reason: "Letting wealthy collectors retain things they supposedly donated and allowing them to take larger deductions for the gifts year after year is a step in the wrong direction," he said. And as for artists' donations: "Deducting actual costs make sense . . . because you shouldn't be able to deduct income you've never earned. That would end up giving artists a double deduction." He added that changing the law "helps wealthy artists, but wouldn't do anything for the starving artist." Encouraging donations to museums by artists and collectors is good public policy, but changing the tax code to do so may be bad economics."

It is rather fascinating to imagine works of art being purchased, held and traded as a commodity. From the studio to the locally owned gallery to major public, private and corporate collections – Art is a taxable industry.

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