US Senate Approves Artists' Tax Deduction Measure

[RuBert]

On April 9, 2003, the U.S. Senate passed by a vote of 95-5 legislation with provisions allowing artists, writers, composers and other creators of original work to take a full fair-market value charitable contribution for the donation of their literary, musical, artistic, or scholarly compositions. Current tax law allows artists to deduct only the costs of materials, such as paint, brushes and canvasses, while ignoring the true value of the work.

The Artist-Museum Partnership Act, S.287, introduced February 4, 2003, by Sens. Patrick Leahy (D-VT) and Robert Bennett (R-UT), with fourteen other senators cosponsoring the bill, was attached to the CARE Act, S.476, with several other changes to the federal tax code aimed at increasing charitable giving.

In addition to extending the charitable deduction to artists for donations of their work, the CARE Act allows a deduction up to $250 for charitable contributions by taxpayers who do not itemize their deductions. The IRA rollover, allowing taxpayers to donate their individual retirements accounts directly to charities without paying a tax penalty, is also included in the bill passed by the Senate.

Arts advocacy organizations have been pressing Congress for several years to correct the tax code prohibiting artists from taking the charitable deduction available to collectors and others who donate works of art to charitable organizations. Now, with passage of the measure in the Senate, the bill goes to the House where it is likely to be approved.

[visualize me]

So now a small statue that might have been wort $500 will be declared as having had a value of $50,000......hahaha!

[rickb]

Does anyone know if this billed was signed into law and if so, when it would take effect?

Thank you,

Rick

www.richardbecker.com

[nero]

tax law is odd. in nz a commercial enterprize can be taxed on stock in hand; therefore stock taking and stock taking sales prior to filing the tax return. I would be wary about valuing up work in stock as one may face a huge tax bill on potential earnings.

The gifting of artwork can also lead to a decline in quality and overall comissioning of sculpture may tail off, if it is percieved that the freebies will be coming in at tax time.

[fused]

Originally Posted by visualize me

So now a small statue that might have been wort $500 will be declared as having had a value of $50,000......hahaha!

If you have never sold any art for more than $500 and get audited by the IRS
after declaring a donated work to be $50,000, you will not be laughing.

[RuBert]

Well this bill has not gone forward - to my knowledge anyway. Artists can still deduct almost nothing if they donate a work, but a collector can deduct fair market value, even if they paid very little for the work.

[JAZ]

Originally Posted by RuBert

Well this bill has not gone forward - to my knowledge anyway. Artists can still deduct almost nothing if they donate a work, but a collector can deduct fair market value, even if they paid very little for the work.

And so, the bottom line seems to be that this bill means that artists and collectors receive equivalent treatment as far as deductions go. That's certainly more fair. One obvious application is that those of us who are frequently asked to donate a work to a fund raising auction for local charity will get a better deal. For instance, in February I sent a small wall sculpture called Vivacity (steel and two acorns) to a fund raiser for the Women's Crisis Center here. All works were to be auctioned for $200 each and the artist could donate all, or half or three quarters. I chose to retain $50 and the center kept the other $150. If this bill passes next year on my taxes I could deduct $150 as a donation rather than the $10 for the steel (acorns were free). Sounds good to me.

[JAZ]

Here's the deduction mentioned.

[Araich]

Originally Posted by RuBert

Well this bill has not gone forward - to my knowledge anyway. Artists can still deduct almost nothing if they donate a work, but a collector can deduct fair market value, even if they paid very little for the work.

Can your wife gift it, and reduce your combined income for taxable purposes?

[ALH]

just sneaking in to relate a story from up here.

"If you have never sold any art for more than $500 and get audited by the IRS after declaring a donated work to be $50,000, you will not be laughing."

A few months ago a local gallery owner, living in another city now, got slapped for over estimating art. Seems a guy got some bad advice to buy up hundreds of works of art, prints mostly, and donate them all to some institution or other. This bulk art was appraised, within 48hrs at an increased value, by the gallery owner. The Judge, to whose attention all this was brought, thought this unreasonable. This certified, and respected, appraiser had their reputation damaged (I can't recall if there were legal ramifications) and the bulk donator ended up doing a good deed for ... well, nothing.


It takes all kinds...I remember one artist telling me that someone who purchased one of her pieces at a charity auction (for little, of course) later asked her to verifiy a higher value to the work, for insurance. My friend found out, after this person asked for a cheap replacement, that the first broken work was destroyed to collect insurance money.

Giving up work to someone who could care less about it is offensive but that is what sometimes happens when other motives enter the picture.

[sculptor]

Originally Posted by Araich

Can your wife gift it, and reduce your combined income for taxable purposes?

Yes-------if you file a joint return.
I believe the text runs..."2 taxpayers filing a joint return shall be construed as a single taxpayer"......so what she donates y'all deduct and 'tuther way round.

¿ for what Jaz wrote......Is it possible that the IRS would be so gentile as to allow the $150 deduction without requring an offsetting declaration of the $200 income?

"fair market value" is a real tickler:
defined as "the ammount at which property would change hands between a willing buyer and a willing seller..........and both having reasonable knowledge of the relevant facts.........(this was later refined with).........considering it's highest and most profitable use....." (though this was originally opined for a public seizure of private property, it is relevant to the term)

eg: If You donate a sculpture to a charity which values it (in writing) at the time of donation at $5,000------and they then sell it at auction or otherwise for $200, and, You would normally have asked the 5k wouldn't have sold it for less than $3,000---------, what is the fair market value for tax purposes?

the "most profitable use" clause would tend to suggest that you should claim the $5k , as that is obviously the most profitable........

Daedalus coud'na done better.

when?

rod