NEW YORK—At Christie’s auction of Postwar and contemporary art in London on June 28, a painting by Scottish artist Peter Doig, entitled Red Boat (Imaginary Boys), 2003-4, sold for £6.2 million ($9.9 million), soaring past its £1.4 million/1.8 million estimate. A few days earlier, a lawsuit filed by New York’s Michael Werner Gallery against the seller James H. Rich and Christie’s, to stop the sale, was settled.
According to the complaint, the Werner gallery’s 2004 sale of the painting to Rich, for $162,000, had a provision written into the invoice, stipulating that the “artwork, while purchased privately, is done so with the explicit agreement that the work is to be given as an eventual gift to the Carnegie Museum of Art.” Rich is a trustee at the museum.
Absent this provision, the gallery claimed, “neither the Gallery nor Mr. Doig would have agreed to sell the painting to Rich—and certainly would not have sold the painting at the bargain price of $162,000.”
Under the terms of the agreement, reached on June 22, the gallery withdrew the lawsuit and Rich promised to donate the painting to the Carnegie Museum if it was not sold at auction. If the artwork was sold at auction, Rich “agreed to donate to the Carnegie Museum a major new painting by Mr. Doig. In addition, Mr. Rich will make a substantial cash contribution to the Carnegie Museum of Art and will continue to support the Museum in the future,” according to a statement released by the Werner gallery.
In December 2005, Rich made a ten-percent fractional gift of the painting to the Carnegie, but the gift was revoked in December 2007, the complaint states. Rich bought back his fractional interest in the painting from the museum, paying the institution $150,000, and regaining full ownership, according to the complaint.
A fractional gift allows a museum to take possession of an artwork for a portion of the year while the donor can keep it for the remainder of the year. The donor is permitted to take deductions based on the value of the artwork over a period of years until the museum’s fractional interest grows to full ownership.
The lawsuit describes “tax reasons greatly diminishing the benefits of fractional giving,” as a factor in the collector’s decision to rescind the gift. In 2006, with the passage of the Pension Protection Act, rules regarding fractional gift-giving were tightened and tax benefits were sharply curtailed.
By the time Rich repurchased his share, the artwork had increased in value by more than 1,000 percent. At a Sotheby’s London’s sale in 2007, Doig’s White Canoe, ca. 1990-91, sold for £5.7 million ($11.3 million), far higher than the £800,000/1.2 million estimate.
The statement by the Werner gallery called the disagreement with the long-time collector “a misunderstanding.”