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Art, New Taxes & Market Opacity

September 21, 2018
art_market_transparency

The Art Market

Scott Reyburn touches on a number of interesting topics in his New York Times article.  First, there is a growing belief that art is a great alternative asset.  While most historically important art will achieve some level of price appreciation, the timeframe for that to happen can vary wildly … from just a few years to decades.  The art market is also very cyclical and all styles and periods of art go in and out of fashion. If you are in the market strictly to make money, I would suggest becoming an art dealer.

Then there is the new Trump tax overhaul which cut rates for wealthy individuals and corporations while removing the benefits art once received from a 1031 exchange.  More people, with more disposable income, should be good for the art market; while the removal of the 1031 exchange will be (in my personal opinion) a minor inconvenience for a select few American collectors.  In all my 37 years of dealing in art, I have never come across someone who used that 1031 exchange.

Finally, Scott touches on a far more important aspect of the art market — its real lack of transparency.  Today the auction sales are all about headline news — how much this or that made.  What most people still do not understand is that many of the blockbuster prices are the result of a 3rd party guarantee.  In addition, a number of those guarantors end up being the buyer.  So the real question is — was the price achieved the real value of the work?  My answer is no!

I still preach that you should buy a work of art because you want to own it, not because someone says you will make money from it. The right works of art will inspire you and over the years they will become members of your family … not something you want to get rid of because they become more valuable.

Source: Art Is Seen as a Glittering Investment. Will New Taxes Take Off the Shine? – The New York Times

 

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