Bill Would Tax Art and Collectibles at Same Rate as Investment Property

Bill Would Tax Art and Collectibles at Same Rate as Investment Property

News story posted in Legislative on 11 March 2009| 5 comments
audience: National Publication | last updated: 18 May 2011
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Summary

Senator Charles E. Schumer, D-N.Y., has introduced S. 394, which if enacted would tax capital gains for art and collectibles at the same 15-percent tax rate as for other investment property and provide a fair market value deduction for charitable contributions of literary, musical, artistic, or scholarly compositions created by the donor.
Citation: S. 394; Art and Collectibles Capital Gains Tax Treatment Parity Act

Full Text:




111TH CONGRESS
1ST SESSION

S. 394

To amend the Internal Revenue Code of 1986 to provide the same
capital gains treatment for art and collectibles as for other
investment property and to provide that a deduction equal to
fair market value shall be allowed for charitable contributions
of literary, musical, artistic, or scholarly compositions
created by the donor.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 9, 2009

Mr. SCHUMER (for himself and Mr. CRAPO) introduced the following bill;
which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide the same capital gains treatment for art and collectibles as for other investment property and to provide that a deduction equal to fair market value shall be allowed for charitable contributions of literary, musical, artistic, or scholarly compositions created by the donor.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "Art and Collectibles Capital Gains Tax Treatment Parity Act".

SEC. 2. CAPITAL GAINS TREATMENT FOR ART AND COLLECTIBLES.

(a) IN GENERAL. -- Section 1(h) of the Internal Revenue Code of 1986 (relating to maximum capital gains rate) is amended by striking paragraphs (4) and (5) and inserting the following new paragraphs:

"(4) 28-PERCENT RATE GAIN. -- For purposes of this subsection, the term `28-percent rate gain' means the excess (if any) of --

"(A) section 1202 gain, over

"(B) the sum of --

"(i) the net short-term capital loss, and

"(ii) the amount of long-term capital loss carried under section 1212(b)(1)(B) to the taxable year.

"(5) RESERVED. -- ".

(b) EFFECTIVE DATE. -- The amendment made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 3. CHARITABLE CONTRIBUTIONS OF CERTAIN ITEMS CREATED BY THE TAXPAYER.

(a) IN GENERAL. -- Subsection (e) of section 170 of the Internal Revenue Code of 1986 (relating to certain contributions of ordinary income and capital gain property) is amended by adding at the end the following new paragraph:

"(8) SPECIAL RULE FOR CERTAIN CONTRIBUTIONS OF LITERARY, MUSICAL, ARTISTIC, OR SCHOLARLY COMPOSITIONS. --

"(A) IN GENERAL. -- In the case of a qualified artistic charitable contribution --

"(i) the amount of such contribution taken into account under this section shall be the fair market value of the property contributed (determined at the time of such contribution), and

"(ii) no reduction in the amount of such contribution shall be made under paragraph (1).

"(B) QUALIFIED ARTISTIC CHARITABLE CONTRIBUTION. -- For purposes of this paragraph, the term `qualified artistic charitable contribution' means a charitable contribution of any literary, musical, artistic, or scholarly composition, or similar property, or the copyright thereon (or both), but only if --

"(i) such property was created by the personal efforts of the taxpayer making such contribution no less than 18 months prior to such contribution,

"(ii) the taxpayer --

"(I) has received a qualified appraisal of the fair market value of such property in accordance with the regulations under this section, and

"(II) attaches to the taxpayer's income tax return for the taxable year in which such contribution was made a copy of such appraisal,

"(iii) the donee is an organization described in subsection (b)(1)(A),

"(iv) the use of such property by the donee is related to the purpose or function constituting the basis for the donee's exemption under section 501 (or, in the case of a governmental unit, to any purpose or function described under section 501(c)),

"(v) the taxpayer receives from the donee a written statement representing that the donee's use of the property will be in accordance with the provisions of clause (iv), and

"(vi) the written appraisal referred to in clause (ii) includes evidence of the extent (if any) to which property created by the personal efforts of the taxpayer and of the same type as the donated property is or has been --

"(I) owned, maintained, and displayed by organizations described in subsection (b)(1)(A), and

"(II) sold to or exchanged by persons other than the taxpayer, donee, or any related person (as defined in section 465(b)(3)(C)).

"(C) MAXIMUM DOLLAR LIMITATION; NO CARRYOVER OF INCREASED DEDUCTION. -- The increase in the deduction under this section by reason of this paragraph for any taxable year --

"(i) shall not exceed the artistic adjusted gross income of the taxpayer for such taxable year, and

"(ii) shall not be taken into account in determining the amount which may be carried from such taxable year under subsection (d).

"(D) ARTISTIC ADJUSTED GROSS INCOME. -- For purposes of this paragraph, the term `artistic adjusted gross income' means that portion of the adjusted gross income of the taxpayer for the taxable year attributable to --

"(i) income from the sale or use of property created by the personal efforts of the taxpayer which is of the same type as the donated property, and

"(ii) income from teaching, lecturing, performing, or similar activity with respect to property described in clause (i).

"(E) PARAGRAPH NOT TO APPLY TO CERTAIN CONTRIBUTIONS. -- Subparagraph (A) shall not apply to any charitable contribution of any letter, memorandum, or similar property which was written, prepared, or produced by or for an individual while the individual is an officer or employee of any person (including any Government agency or instrumentality) unless such letter, memorandum, or similar property is entirely personal.

"(F) COPYRIGHT TREATED AS SEPARATE PROPERTY FOR PARTIAL INTEREST RULE. -- In the case of a qualified artistic charitable contribution, the tangible literary, musical, artistic, or scholarly composition, or similar property and the copyright on such work shall be treated as separate properties for purposes of this paragraph and subsection (f)(3).".

(b) EFFECTIVE DATE. -- The amendment made by this section shall apply to contributions made after the date of the enactment of this Act in taxable years ending after such date.

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Comments

Focusing on Reality

Mr. Marks, the law limits only artists' deductions for contribution of their own works to cost basis (paint and canvas); so long as the gift is made to a public charity for use in its charitable endeavors, a donor who purchased the work and holds it for a year can deduct the full fair market value. The limitation regarding artists is 40 years old and has worked pretty well at stopping what it was intended to prevent: abuse. As a tax lawyer and artist, I can live with the restriction. Artists who give away their work can and do get great tax benefit from both the Gift and Estate Tax Deductions. Senator Schumer, we have far more important things on our plate. Mark B. Weinberg Weinberg & Jacobs, LLP 11300 Rockville Pike Rockville, MD 20852 Voice 301-468-5500 Fax 301-468-5504

THE ARTIST AS A DONOR

This is an attempt to treat the artist on an equal plane with the collector/investor. If a

Schumer's Proposal

I have never gone on the record in opposition to increasing charitable tax deductions, but I will in this case. Before this kind of deduction was limited to cost basis about twenty years ago, it was subject to the most egregious abuse, often earning mention in Connie Teitel

Schumer's proposal

I have to disagree with Mr. Gartner. If I buy a share of stock for $25 and it rises to $500, when I give that share to charity I can deduct $500. It seems to me even more important that the same rule be applied to things that are actually made by our neighbors' hands. If I support a young artist by buying a work for $25 when s/he is developing skills, and many years later, after the artist becomes successful and the market is hot, why should I be limited to a $25 deduction when the piece of work is now worth $500? In EVERY human endeavor, there is a potential for abuse. Let's not shoot out all of our knees, just because a few people are greedy. Ed Marks, Cincinnati (Attorney and art collector)

Agreed

This is why, just a couple of years ago, rules were tightened surrounding appraisals of gifts and appraiser standards. Make possible abuse available and it will no longer be possible, it will be real. Great "Pig Rule", as well....

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