COMMENTS ON THE ART MARKET
As I have prefaced a few other newsletters in the past please keep in mind, while reading this, that I am neither a lawyer nor an accountant – by any stretch of one’s imagination. This month’s main article discusses legislation that is making its way through both the House and Senate which will have a positive effect for many of you if it passes.
In June of this year a bill was introduced into both the Senate (S.1186), by Mr. Domenici, Mr. Schumer, Mr. Cochran, Mr. Allard, and Mr. Coleman, and the House of Representatives (H.R. 2786), by Mr. Reynolds and Mr. Thompson, titled the ‘Arts and Collectibles Capital Gains Tax Treatment Parity Act’. The purpose of these bills are, according to the government’s web site, “to amend the Internal Revenue Code of 1986 to provide the same capital gains treatment for art and collectibles as for other investment property and to provide that a deduction equal to fair market value shall be allowed for charitable contributions of literary, musical, artistic, or scholarly compositions created by the donor.”
The first part of these bills deals with the current capital gains tax rate on the sale of art and collectibles which is 28%, as compared to the 15% tax assessed on other investment property such as stocks and bonds. The only thing this discrepancy does is discourage the purchase and sale of art and collectibles … and as many of us have seen over the past few years, these are areas which have seen a great deal of price appreciation – at least when you compare them to stocks.
The second part pertains to charitable contributions of certain items created by the taxpayer. Now I know what you are thinking … does that mean that any taxpayer could create something, donate it to a public institution, and receive a tax benefit? Not exactly! The work in question must have been created at least 18 months prior to the year it was donated; needs to be donated to a qualifying institution (IRS 501 (c)(3) status); must be accompanied by a qualified appraisal if the value is over $5,000 to substantiate the amount donated; and pass the securitization of the IRS’ Art Advisory Panel. So, donating your child’s most recent creation to the local public school and writing that off is not the way to go.
As the law stands now, a collector can donate a true work of art to a qualifying public institution and receive a tax deduction equal to its current fair market value; however an artist who wants to donate one of their works can only deduct the cost of the materials used to create the work -- the cost of the canvas, stretcher and paints. Here is an illustration of the problem: let’s say that an artist painted two identical works in 1960 and sold one to a collector for $1,000 and kept the other. Now we fast-forward to 2005 and the painting that the artist sold to the collector for $1,000 is worth $100,000. If that collector decides to donate it to a museum, they will be able to write off $100,000. However, if the artist decides to donate the work kept, he/she is only able to write off the cost of the materials used to create the work --- which would not even equate to the price the artist would have received for it in 1960. Not only does this seem very unfair, but this discrepancy discourages artists from donating works directly to museums while they are still living. It is interesting to note that once an artist dies, the works in their estate are valued at fair market, and if donated at that time, the same work could offer the estate a sizable deduction. Hummm ... once again, the artist needs to die before he/she can see – from the great beyond – big benefits.
While the latter issue may not be on the top of every collector’s list of things they want to support, I am sure that all of you would agree that the first part of this bill is. A number of art associations have banded together to create and/or support the American Visual Arts Alliance (AVAA). This newly formed organization was created with one goal in mind -- to persuade Congress to amend the current Federal tax law to reduce the capital gains tax to 15% on art and collectibles as well as creating parity for the value of works donated by living artists. To help achieve this goal, the AVAA has retained the services of two lobbying organizations, the Glover Park Group and Fierce, Isakowitz & Blalock.
I will keep you all posted on the progress of this initiative and should any of you have contact with members of Congress, please mention your interest and support of these bills.
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Crime & Punishment Update
Back in February (Volume 50) I discussed the case of a New York art dealer who, over a period of years, purchased original works by many of the important Impressionist and Modern masters; had them copied; sold the copies to unwitting individuals (many in the Orient) and years later resold the originals. The whole scam surfaced when both an original and forged work by Gauguin appeared in catalogs for two different auctions that were taking place just days apart.
Last month, according to The Maine Antique Digest (MAD), the dealer, “Ely Sakhai, owner of a Manhattan art gallery known as Exclusive Art, was sentenced … to a 41 month term of incarceration as a result of his conviction on federal mail fraud charges for an international art forgery scheme that spanned approximately 20 years. … In addition to the jail term, Sakhai was ordered to pay restitution in the amount of $12.5 million to victims of the offenses and to forfeit 11 paintings, believed to be authentic works that Sakhai forged copies of during the scheme … Sakhai was directed to surrender to prison on September 7.”
Chalk up one for the good guys!
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Recent Results
As I have noted in a number of our recent newsletters, prices for art and collectibles have been on the rise. Well, the summer has continued to see its fair share of exceptional prices and here are a few of the highlights:
Among the more pricy items in the ‘collectibles’ category were a pair of 39 inch long Chinese Kangxi (1662-1722) porcelain biscuit leopards that commanded a little over $4.14 million; a 1794 $1 Liberty coin brought $747,500 while an 1838 half-dollar with capped bust and reeded edge made $632,500; a duck decoy by Orlando “Os” Bibber of Harpswell, Maine brought $162,300, while Nathan Cobb’s swimming brant made $137,000 and Charles Schoenheider’s standing goose fetched $126,000. In the field of music, a whopping $1.25 million was paid for the hand-written lyrics of The Beatles “All You Need Is Love”, while a pair of John Lennon’s yellow tinted glasses made $111,250.
For those of you who are fans of pottery, here is an interesting result … at a recent sale the earliest known example of a slip decorated jar marked with “Shaws Creek Pottery 1839” was expected to sell for $30,000 - $40,000. The bidding ended with a record price of $138,600. And for our readers who are fans of toy trains … a recent single owner sale brought in a record $5 million. Among the exceptional pieces and prices were The Märklin Grand Central Station with platforms that measured 29 x 19 inches (estimated at $30,000 - $40,000) which made an impressive $110,000 and Märklin’s #2609 gauge III locomotive and tender that brought $82,500.
In the fine art realm, here are a few spectacular summer results: Canaletto’s Venice, the Grand Canal, looking north-east from Palazzo Balbi to the Rialto Bridge brought a auction record $32.7 million while his The Bucintoro at the Molo, Venice, on Ascension Day made $20.1 million; Andrea del Sarto’s drawing titled Head of Saint Joseph looking down, with a subsidiary study of his features ( Two studies of legs, verso) made an impressive $11.7 million and Francesco Guardi’s The Grand Canal, Venice, with the Palazzo Bembo fetched $7.7 million.
Even in the ‘dog days of summer’ the art and collectibles markets are still chugging along.
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Another Reminder
The exhibit titled Artist as Narrator: Nineteenth Century Narrative Art in England and France at the Oklahoma City Museum of Art will open on September 8th. The catalog for this exhibit, which is fully illustrated with full color images, can be ordered directly from the museum and if you mention that you were recommended by Rehs Galleries, they will give you a 10% discount. For a copy, please contact Christen Conger by phone: (405) 278 – 8232 or e-mail: cconger@okcmoa.com.
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Another Plug for the Gallery
In Volume 55 I mentioned that one of my older newsletters was recently published in an edition of Plein Air Magazine. Well, our September 2005 edition arrived in the mail the other day and again, to my surprise, they used another: To Insure of Not to Insure: 7 Tips on Protecting Your Collection (taken from Volume 25).
Howard L. Rehs
Gallery Updates: Gallery hours for the month of September are Monday through Thursday 10am – 5:30pm; all other times by appointment.
Web Site Updates: New works by Gregory Frank Harris, Charles H. van den Eycken, John Kuhn, Paul D. Trouillebert, Frederick C.V. Ede and Edouard Leon Cortes have been added to our web site this month.
Recent sales have included works by Eugene Ciceri, Allan Banks, Gregory F. Harris, Daniel Ridgway Knight, William Didier-Pouget, Andrew F. Bunner, Auguste Bonheur, Benjamin E. Fichel and two beautiful Vincent Clares.
Next Month: Not sure yet … but thinking real hard.