There's a number of schemes to do this, art trading is just one vehicle to accomplish this but they all support the same basic two principles:
1 - get out of paying taxes by "showing a loss" somewhere
2 - don't ever lose money trying to get out paying taxes
Show tax deferrable losses only when you make gains elsewhere sufficient to cover at least the basis as well as the capital gains that you would have earned had you sold the item.
It works best if you do this across completely unrelated asset classes: offset real estate taxes with collector cars, offset art sales taxes by taking a loss in some shell company. It takes a lot of money to get in this kind of scheme, because you have to vacuum up property that's likely to grow in value. For example, don't buy cars (which depreciate), buy one of kind sports cars for which there's a collectors market. It also takes a lot of time to tap into various collector markets and find ones that are likely to yield or will soon yield growth for your asset classes. Not all collector markets go up forever, they're as fad driven as anything, but some markets have reliably shown growth -- like fine art.
My favorite scheme is one you see on the "Real Housewives" show. Start a nonprofit charity, get all your friends to donate to it (they're all trying to skip out on taxes also), pay yourself an exorbitant salary out of this "charity" and hold elaborate fundraisers that are essentially parties as the operating costs for the charity. Give the remainder to another charity downstream. Attend your friend's charity fundraisers/parties, donate to them in turn.
Looking at the circle of "philanthropists" they get to attend socialite functions, party, get paid, and do it all by helping each other offset taxes on gains they're making in other investments within their own households. They also get to inexpertly run "charities" where the hotel ballroom they rent for the function costs more than the remainder of the donated money they actually send to their claimed cause -- but also if the tax man comes they can just say they had no idea what they were doing.
Tie it to some personal event (e.g. "my second cousin fell from a bike and broke her wrist and now I'm running a charity for bone density research") and people outside the main circle might get sucked in and also augment the entire thing with additional heartfelt donations, which only increases the size of the parties and the salaries. Advertise you "raised $x" at an event, but don't mention how much went to actually supporting the cause.
It works because:
- it both obfuscates and mixes up everybody's money to the extent that it becomes very hard to pull apart
- the individual charities don't become large enough for the IRS to spend time on if you file all the appropriate paperwork
- it's not really an asset class in the same way investments are, so it's nearly impossible to show tax avoidance by simple substitution
- the government wants to encourage charity
You have to get really large and egregious before anybody in the IRS cares. Like NRA large.