DONATIONS AND TAXES
When wealthy people make large donations of art to museums, they normally do so in the hopes of getting a tax break for their largesse. Regulators worldwide are often critical of these deals, however, as a Canadian case illustrates.
In 2012, the famed portrait photographer Annie Leibovitz needed to earn some money quickly since she had recently been in financial trouble. Someone, although sources are uncertain who came up with an idea to help the situation.
A wealthy Canadian would purchase approximately 2,000 prints from Leibovitz for $4.75 million and donate them to a museum in Nova Scotia. The wealthy donor would then be able to get a tax break in Canada.
However, the idea has not gone over well with Canadian regulators who must approve of it.
The story is reported by The New York Times in "Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge."
The problem is that the museum is trying to get a tax break of $20 million for the wealthy donor.
Three different independent auditors have supported that the pictures would be worth $20 million if they were sold individually.
This has been difficult for regulators to swallow since the donor would be receiving a break far greater than the amount that he spent.
Regulators have rejected the application for the break three different times, but the museum is attempting a fourth application.
The laws are different in the United States. It is nonetheless still important to understand that large gifts of art to museums can be scrutinized closely by tax officials, especially if done as part of a plan to shrink an estate below the estate tax threshold.
Reference: New York Times (July 25, 2017) "Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge."