Can you provide documentation for these supposed tax benefits? (I'm genuinely curious) AFAIK there are no tax benefits at the point of buying the art, and cap gains benefits are no different than stocks, real estate, etc.
* 10 rich guys buy 100 paint splotch canvases from a dude who wears black and smokes cigarettes
* they keep 90 canvases in their basement and sell 10 of them back and forth to each other for increasing sums of money, paying taxes along the way
* when the prices are at $20 million per painting, they donate all of them, including the 90 in the basement (which appreciated just by exchanging the 10) for $2 billion in combined tax writeoffs
[1] https://www.journalofaccountancy.com/issues/2010/jul/2009209...
It isn't really a problem for other assets because they don't have the museum donation market that's key to the scheme working. You can't find a charity who is looking for superyacht donations.
Not at all: to have a "market" you need buyers, sellers and goods to be fungible.
In your example buyers and sellers are only 0.000001% of humanity: other people cannot afford to play this game.
Also the goods are unique. Brand new paintings would not be sold by the author him/herself at that price 99% of the time. They skyrocket in value only when sold between billionaires.
While it seems possible that flooding the market with all 100 paintings at once might crash the price down more than the tax writeoff is worth, it seems unlikely that this would happen on the first sale. The counterargument would have to be that there doesn't actually exist any outsider who would pay anything close to the claimed value for the work.
Another odd aspect of this is that once individuals own a substantial numbers of works by an artist, it's in their interest to keep the price high for that artist's works. So if a new painting comes up for auction, they would benefit by never allowing it to be sold for a low price --- even if that means "overpaying" for the new painting. So maybe the end game is that the minority owners start to sell, knowing that the majority owners have to buy, and only after all the works have single ownership (with a record of high sales prices) sales does the donation scheme happen.
Interesting. I presume others have analyzed these strategies in depth?
GP's suggestion seems to be that non-conspirators would not actually be willing to pay that much -- a bit like a pump-and-dump scheme, but only the IRS gets duped.
I'm guessing that asabjorn's comment is more accurate: People donate art at a fraudulently-inflated price to lower their tax liability.
Right you pay brokerage fee at time of purchase and capital gains tax at time of sale though, which is often larger than sales tax.
https://www.nytimes.com/2019/01/12/style/david-libbie-mugrab...
edit: https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth#Basis
The English version is lacking some exempted elements compared to the French version, where works of arts are explicitly cited.
* objets d'antiquité, d'art ou tout simplement de collection, parts de sociétés civiles propriétaires de tels objets (antiques, art, collections, and shares in what I think are trusts of various kinds)
* biens ruraux loués à long terme et participation dans des groupements fonciers agricoles (which appears to have been translated as "anonymous bonds"--a better translation is long-term rural bonds and agricultural cooperatives).
The French Wikipedia also states that this was replaced in 2018 with a new tax that's on property. My grasp on the French legal terminology here is weak, but I think it refers to real estate property only and does not include personal property, which would include things like artwork.
Also I didn't think about the ISF deletion then.