Hot on the heels of The New York Times’s look at how collectors are avoiding capital gains taxes on art sales through the like-kind exchange in the tax code, Bloomberg’s Katya Kazakina has a great story that delves into how people in the art industry feel about the practice (which Dean Valentine neatly summarizes: “Whatever profit you make can be reinvested in art instead of going down the government drain”).
Chicago-based collector Stefan Edlis’s sale of an $80 million Warhol provides the opening case study in the article, and he makes an argument for why the provision is preserving. (The Obama administration wants to eliminate it.) Edlis:
“What would I do with the money? Buy a big boat? Buy an island in the Caribbean? I am an art investor so investment in art was the most logical thing. Almost 90 percent of my net worth is in art. I’m over-invested.”
Rob Storr, the dean of the Yale University School of Art, comes out against the practice:
“Stefan Edlis has been generous but many people who will take advantage of this will not be generous. People at the top of the economic ladder don’t need more mechanisms to protect their wealth. I am not interested in making it easier for people to invest in art. It’s ruining the art world.”
Storr adds that the provision should be abolished as it protects the wealthy and “feeds a speculative market.”
For the intricacies of Edlis’s maneuver, head to Bloomberg’s article.