Artsy editorial explains another potential change in the Federal tax code that would affect art collectors and the art market
More art market participants than ever before now use a special tax strategy that enables them to defer paying capital gains taxes on the sale of art, making it an ever-more-important factor fueling art market turnover, especially for very expensive works of art. I call it the art market’s “rocket fuel.”
Unfortunately for art buyers, this tax strategy recently attracted the attention of the U.S. House of Representatives, which in early November proposed its elimination in the Tax Cuts and Jobs Act. But observers have predicted the demise of this special tax preference for art for the past 20 years, only to see it remain steadfastly in the tax code. What follows is an explanation of how the tax strategy works, and who is eligible to use it, followed by a discussion of what its repeal could mean for the art market.
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Lisa Garcia is a fine art appraiser based in San Antonio, Texas.