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Jon and Mary Shirley used to give artwork by the likes of Jackson Pollock, Mark Rothko and Alberto Giacometti to the Seattle Art Museum. No longer. A federal crackdown on deductions for so-called fractional gifts of art has made donating too onerous for them.
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| Alberto Giacometti's 'The Dog' (1951) |
The Urge to Give
Despite the difficult donating terrain, the urge to give art remains strong. Art enthusiasts increasingly want to donate their collections while alive, advisers say. But it's increasingly important for donors to be very careful when making gifts of their prized pieces.
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These deductions can prove sizable. While the stock market has stumbled and banks have collapsed, art's value has kept on rising. The Mei Moses Annual All Art Index, which tracks repeat-auction sales of the same works, posted more than a 20% return in 2007, according to Beautiful Asset Advisors LLC, the firm that compiles the index. That beat the Standard & Poor's 500-stock index by about 14.5 percentage points.
New Restrictions
The Schumer-Grassley plan would ease some of these restrictions, but would add others, according to the people briefed on the negotiations. Collectors would once again be allowed to take bigger deductions over time as their art appreciated. But higher art values, for tax purposes, would be restrained by any deductions taken previously, under one option being discussed. For example, say a donor gave 10% of a painting valued at $100,000. For that initial gift, the donor could deduct $10,000.
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"We didn't pay a lot of money in those days for those works," says Mr. Jonas, 78, a co-founder of now-defunct retailing chain Lechters Inc. "Whereas today, it's out of sight."
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