Seize the Opportunity (Zone): Latest Tax Strategies for Owners of Art and Other High-Value Assets

Sullivan Tax Briefing (4:00 – 5:45 p.m.)
Sullivan Conference Center, Boston, MA
October 24, 2018

Art has aesthetic value of incalculable importance, but it can also be a large – and growing – repository of wealth. Recent changes in federal tax law have altered dramatically some of the key strategies that can (and should) be used to manage a valuable and growing art collection, as well as other high-value tangible and intangible assets.

Art is categorized as a "collectible" and therefore is subject to a federal capital gains rate of 28%. Add in state income tax and the Net Investment Income Tax ("NIIT"), and the combined tax rate can be upwards of 40%, depending on the state of residence. Meanwhile, the famously illiquid nature of an art collection makes for a very challenging estate plan.

Before 2018, like-kind exchanges under Code Section 1031 were a viable strategy for upgrading an art collection while deferring tax, but that provision is no longer available. In its place, however, is a fascinating new tax benefit called a Qualified Opportunity Fund ("QOF"), which allows a taxpayer selling appreciated property to rollover the gain into a qualifying investment, which can include investments in real estate or in equity of a company located within a so-called "Opportunity Zone." Amazingly enough, it may even be possible to invest gain into a for-profit art museum located in an Opportunity Zone – in other words, sell art to buy other art.

The topics discussed at this Tax Briefing Seminar included:

Additional Resources:

Program Outline (PDF), by Joseph Darby

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