Art as an Asset

Art and the Collector European Foundation Wealth Strategies Group (TEFAF) categorizes art as Sarah D. McDaniel, CFA This discussion intends to heighten follows: 1. Classical Antiquities Eliana Greenberg awareness of the significant role art and Ancient Art, 2. Antiquities, 3. Liz Gully may play in the context of a Old Masters, 19th Century and collector’s overall wealth. Impressionists Works, 4. Modern The Blue Rider Group at Generally, a collector may segment Art, 5. Post-War and Morgan Stanley wealth between financial assets , 6. Prints, Maryanna McConnell including stocks, bonds and real Precious Books and Maps, 7. La Lauren Sparrow estate from other possessions such Haute Joaillerie and 8. Design Dan Desmond as art. This separation is Objects 1. For the purposes of this sometimes the result of art being discussion, art is meant to considered a personal interest encompass as broad a rather than an asset. Additionally, categorization as possible and the historical opacity and may include the following which is inaccessibility of the by no means a complete list or may also be contributing factors. representation: , However, these factors have and , jewelry, cars, furniture, are being alleviated. It is because wine and collectibles. of this increased transparency that a collector should carefully The Art Market consider the role of art on a balance sheet in addition to the The art market has evolved from salient implications of owning art. patrons commissioning works of art based on the ’s talent and The definition of art varies reputation in the 17th century to depending on who answers the the emergence of houses question. For example, The in the 18th century and galleries in

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the 19th century. Later art fairs are open to the public so Dealers typically work in either the developed in the 20th century technically every or lot is primary market (selling directly from followed by online providers available to the largest group of the studios of working or surfacing in the 21st century. potential buyers. Buying at auction directly from the estates of can be a more “democratic” deceased artists) or in the Auction Houses method of acquiring art as secondary market (reselling work auctioneers accept the highest bid that has already been in the market While there are thousands of via the age-old process of real-time at least one time). Dealers in the auction houses globally, arguably bidding. Auction houses take a secondary market tend to buy and the two oldest and largest are buyer’s premium and charge a sell higher priced work. Christie’s and Sotheby’s. sellers on the sold or hammer price. Auction houses Dealers and Gallerists play a  Christie’s, founded in 1766 by efficiently gather thousands of significant role beyond the James Christie, has since items annually across a broad brokering of artwork. They nurture conducted the greatest and spectrum of genres, periods and new talent, educate the public and most celebrated auctions media. Catalogs with descriptions provide advice on maintenance, through the centuries providing of the art are produced and experts installation and display. a popular showcase for the offer bidders guidance about the unique and the beautiful. Art Fairs items on offer. Christie’s offers around 350 auctions annually in over 80 Works sold at auction, however, Among the many closely watched categories, including all areas are exposed. Should they not sell international fairs is Frieze Art Fair of fine and decorative arts, or sell at a low price, the public (London), TEFAF (Maastricht), Art jewelry, photographs, sales record for that artist and Dubai and Art Basel. Using Art collectibles, wine, and more. object are forever altered. Basel as an example, consider the Christie’s has a global Additionally, many auction houses following: presence in 46 countries, with now conduct an increasingly large  Art Basel started in 1970 by 12 salerooms around the world share of their business as private Basel gallerists Ernst Beyeler, including in London, New York, sales. In other words, collectors Trudi Bruckner and Balz Hilt. In Paris, Geneva, Milan, can buy or sell privately through its inaugural year, the Basel Amsterdam, Dubai, Zürich, traditional auction houses as well show attracted more than Hong Kong, Shanghai, and as through Gallerists and Dealers. Mumbai 2. 16,000 visitors who viewed Dealers and Gallerists work presented by 90 galleries  Sotheby’s, founded in 1744 by representing 10 countries. Samuel Baker, is a British Dealers and Gallerists are perhaps Thirty art publishers also multinational corporation closest to the artist. They arrange participated. headquartered in New York shows, sometimes absorb a portion  By 1975, five years after its City. One of the world’s largest of production costs and founding, the Basel show brokers of fine and decorative occasionally serve as liaison to reached almost 300 exhibitors. art, jewelry, real estate and museums and . Through The participating galleries collectibles, Sotheby’s their “brick & mortar” spaces, this came from 21 countries, operation is divided into three part of the market is a critical link attracting 37,000 visitors. segments: auction, finance, between artists and collectors. and dealer. The company’s Dealers typically share profits with  In 2013, Art Basel launched its services range from corporate the selling artist or consigner and inaugural show in Hong Kong. art services to private sales 3. prices are sometimes negotiable to Half of the participating the buyer.

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galleries came from Asia and Despite the majority of the art however in that the shares reflect the Asia-Pacific region. market remaining unregulated and the profitability of the business private, there has been increased which is partially attributable to the  In 2014, Art Basel partnered transparency with regard to art market and valuations realized with Kickstarter to create a medium, price and volume. While but also attributable to the efficacy crowdfunding initiative aimed at auction houses provide price of the management of the funding non-profit discovery through publicly available company. Additionally, because organizations worldwide. information about their sales, Art these securities trade on Together with JRP Ringier, Art Fairs assemble large numbers of exchanges, they are also exposed Basel publishes Art Basel | dealers so potential buyers may to exogenous shocks to equity Year 44 the first book that better understand the landscape of markets that are unrelated to the 4 covered all three shows . sellers and the available inventory art market. of art. Additionally, with advances Art Fairs are tremendous social in technology and user adoption, Art securities with indirect access to events and a great way to gather more sales information is being the art market include: information about many facets of captured and recorded for a the art market. Art Fairs are a major  Sotheby’s: listed on the New broader audience. focus for dealers many of whom York Stock Exchange and is expect to meet new clients and a Accessing Art one of the aforementioned majority of whom expect fairs to auction houses 5 . continue to drive increased sales. As the art market evolves, so too  Artnet: listed on the Frankfurt do the methods of gaining art Stock Exchange and is an art Online exposure. To date, the market website that provides predominant means of accessing Collectors are increasingly relying images of works of art with art is from direct purchases. on online platforms and digital their realized market prices. However, there are increasingly images to make purchasing “Artnet operates an new ways of indirectly gaining decisions. There are a number of international research and exposure to the value of art via platforms dedicated to this type trading platform for the art other types of transactions. Direct collecting – Artsy & Artspace market …It provides services purchases of art may be among them – and traditional that promote accessibility accomplished through the auction houses have begun to use allowing users to research art, previously described auction online sales for lower value works. contact galleries directly and to houses, dealers, art fairs and Reduced overhead allows these attain price transparency.”6 online purveyors. Indirect methods providers to charge a lower of accessing art may be commission to buy and sell. Online  Artprice: listed on the NYSE accomplished via art securities, sales are a democratizing force in Euronext Exchange “claims to financing and funds. the space of art collecting. be the world’s leading online Additionally, there are numerous Art Securities art price database with more websites and providers that offer than 27 million entries increasing pricing transparency People may gain indirect access to commented by its art historians some of which include: the art market by purchasing art covering as much as 500,000 securities. Examples of such artists. Artprice Images allows Artnet.com Artforum.com securities are equity shares in the access to … 108 million Askart.com Theartnewspaper.com below listed companies. By images constantly updated Artfact.com Flashartonline.com 7 purchasing shares, one gains from various auction houses.” Artprice.com Frieze.com exposure to art indirectly by Artandauction.com Gabrius.com Artbase.com Kunstmarkt.com becoming a fractional owner of the business. The exposure is not pure

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Art Financing museum but also to the business of changing fortunes of the UK maintaining art for public enjoyment economy and protection against Indirect access to the art market and the sentiment of the public currency realignments. may also be accomplished through toward art. art financing. By providing the The British Rail Pension Fund funding for an art transaction, one Art Funds invested 40 million (of its 1 billion) receives interest and future pounds at the time into repayment of principal backed by For decades, there have been approximately 2400 works of art. art with a market value subject to numerous art funds launched with The pension worked with Sotheby’s market fluctuations. This exposure mixed results. The demise of many to purchase art over multiple is not pure however in that the loan of the funds is largely attributable to categories of which approximately also introduces creditor risk the cost and complexities 75% of the value was invested in unrelated to the value of the art. If associated with owning art and the following collections: Old the debtor is unable to pay, then holding it over time. Holding art is Master Paintings 19%, Old Master one may sell the art subject to expensive in that it must be 11%, Impressionist Art market value to repay the loan or purchased, moved, stored, insured 10%, Chinese Works of Art 10%, one may gain exposure to the art and sold, and these expenses Books and Manuscripts 10%, directly by taking possession. would be in addition to the Antiquities 8% and management and performance Medieval/Renaissance Works of Art Art financing with indirect access to expenses of the fund itself. 7%. To alleviate the carrying costs the art market includes: Additionally, art valuations are of holding the art which were cyclical and oftentimes the funds approximately 2% of book cost,  Financing dealers or artists – raise money near the end of cycles approximately 35% of the value of one may lend money to a as investors are attracted to higher the art was on loan to museums. dealer to finance the gallery or publically realized prices. Arguably, This also attributed to the a particular artist and share in the most well-known and relatively of the works which the overall gallery’s or the successful art funds include the would likely be beneficial later specific artist’s profits or British Rail Pension Fund and when they were sold. In 1987, the losses. Philip Hoffman’s Fine Art Fund. trustees decided to begin to sell the collection given the advancement  Financing auction guarantees The rationale for the British Rail of prices in the art market however and bridge financing – one may Pension Fund to begin investing in given the number of pieces to be loan money to an auction works of art in 1974 was to provide sold and the later correction in the house to fund a guarantee diversification and inflation art market, the last piece was not against a sale or specific work protection against the financial and sold until 2003. Overall, the of art and share in the auction economic conditions resulting from intention of outpacing inflation was house’s success or failure to the OPEC led oil crisis in 1973. At generally achieved across most realize the anticipated the time, the stock market had collecting categories but the of the art. fallen dramatically, there had been predominant significant price a sharp fall in the commercial Another type of debt financing realization was concentrated in a property market, the pound was related to art is the issuance of small number of pieces. While the depreciating strongly against other municipal bonds by museums to inflation protection was achieved, it currencies, rates of inflation were finance their ongoing operations, was not as advantageous as unprecedentedly high and there renovations and expansions. While expected given the appreciation in were no inflation-indexed the viability of the bonds is not other asset classes over the time of investments available. Works of art 8 related to art prices, an investor the investment in art. offered the advantage of having gains exposure to not only the international marketability, thereby The Fine Art Group was founded efficacy of the management of the providing a hedge against the by Philip Hoffman in 2001 as a new

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endeavor to help clients approach the holding costs of art, they  Valuations can be challenging the art market with a view to generally still carry the risk inherent given few if any direct investing as well as collecting. to the art market. As the art market comparables exist Philip Hoffman launched his first continues to evolve, additional Fine Art Fund in 2004 which was indirect art investments may arise  There are a myriad of indices one of the first of its kind to invest and might include: with diverse underlying in art. Since then, his company has calculations and results grown from operating one long-  Art futures on one or more art  Both are highly illiquid term investment fund to managing indices to hedge art exposure; subsequent funds of varying size  Securitization of art collections  Buying, holding and selling and focus: to raise funds and provide costs are considerable  2004: Fine Art Fund I is broader ownership of art;  Buying and selling is launched  Exchange funds for artists and infrequent. collectors’ art to provide  2006: Fine Art Fund II is To put these nuances in context, it diversification; and launched is first helpful to consider the definition of an asset class as well  2009: Fine Art Fund I begins  Bonds to finance museum as how an index might track and returning capital shows to other museums with interest payments tied to ticket measure an asset class over time.  2010: Fine Art Fund III is sales.  An asset class is a group of launched Art on a Balance Sheet securities with distinct  2012: Fine Art Fund II begins investment characteristics, returning capital While a collector’s rationale for including the level of risk and collecting art may be varied, the potential for delivering returns  2013: Fine Art Guarantee Fund significance of art on a collector’s and performance in different 11 is launched. balance sheet is increasing. As an market conditions. Each example, Larry Fink, the chairman asset class is homogenous and

and CEO of BlackRock said “the largely independent of other asset classes. 12 The three While there is little public two greatest stores of wealth main asset classes are information regarding the funds in internationally today include equities, fixed income and cash particular and their performance, by contemporary art … and I don’t equivalents. comparison over this time period mean that as a joke, I mean that as a serious asset class and the other there have been dozens of public  “An index is a select group of art fund closures.9 store of wealth today is apartments in Manhattan, Vancouver and investments whose collective 10 performance can be taken to There are collectors who collect for London.” represent a market as a whole, passion, those who collect for or at least a clearly defined financial return and those who have Interestingly, the evolution of real subset of that market. While both goals in mind. There are still estate as a definable and some indexes may be others who see the vast value measurable asset provides recalculated once a day or represented in the art market and precedence for art in that real less, indexes representing wish to participate without actually estate and art present similar large, liquid and active markets collecting for which there are a few challenges including the following: are typically recalculated ways to do so. While these  Each asset is unique continuously throughout trading transactions for indirect investment periods to reflect up-to-the- may reduce the illiquidity risk and moment pricing data and to

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indicate the direction and for art and real estate, indexes artworks sold more than magnitude of the market's price based on average prices over a once.15 sentiments.” Index values can period of time may depend more on be compared in order to the mix of objects that come to Understanding the benefits and calculate relative performance market than on changes in the shortcomings of art indices, is and to show how the market underlying market itself.” 17 helpful particularly in appreciating may have changed over certain trends relating to a single artist or a time periods.13 As is the case with other assets, category of art. To understand there are hundreds of sources of much higher level trends, there are To address these challenges for art market data and infinite ways to three widely read reports: Deloitte’s real estate, Karl Case, Robert represent it. Most of these art Annual Art & Finance Report, The Shiller and Allan Weiss created the market data aggregators use public European Fine Art Foundation’s Case-Shiller Home Price Indices auction records to assess trends of (TEFAF) Art Market Report and Art (now named S&P Case-Shiller) that collecting categories or specific Basel’s The Art Market 2017. are calculated from data on repeat artists over time, and most focus on These industry level surveys sales of single-family homes. 14 the more liquid parts of the market. discuss the art market broadly, Given that repeat sales are the only Limitations of these indices are that versus the performance of any one basis for true apples to apples they do not include private sales (at artist or category. return comparisons over time, auction or through galleries), Jianping Mei and Michael Moses thereby only reporting on the public Implications of Owning Art utilized a similar process to create market. Most indices also use only the Mei Moses Fine Art Indices data for artworks that have sold There are peculiarities of art as an (now named Sotheby’s Mei more than once, and do not include asset that require extra vigilance Moses). The Mei Moses database artwork offered for public sale that and understanding on the part of has more than 45,000 repeat-sale fails to sell thus introducing some the collector including: auction pairs from Christie’s and measure of selection bias to the  Financial stewardship of Art Sotheby’s, with approximately data. Examples of other art indices 3,000 incremental pairs added include:  Strategic planning each year from recent auction considerations for art transactions. This information is  ARTPRICE: Publishes market used to create an art index that level and category level data as  Costs of transacting and dates from 1875 and includes eight well as artist-specific indices. holding art collecting category indexes each The database is comprised of with various starting dates the results from 4,500 auction  Complexities of art valuation. earliest of which is the Old houses (excluding most online Financial Stewardship of Masters/19th century index which sales) and also uses repeat 15 starts in 1900.15 16 According to Mei sale methodology. Art and Moses “creating an index for  ARTNET: Monitors the The ultimate challenge facing a individually unique objects such as performance of specific collector may be what to do with art or residential real estate collecting categories and of the collection after the collector’s requires an approach different from certain artists. It uses data from death. Does the collector intend to that used from homogeneous 1,600 auction houses keep any, a portion or all of the products such as individual stocks, worldwide, including data from collection together and who will bonds, and commodities. This is online auctions. Artnet does oversee the art. It is prudent to because of trading infrequencies report data on artworks sold create a strategy so as to not put and characteristic differences only once and does so undue financial or emotional among the objects that come to separately from data on pressure on the surviving family. If market from period to period. Thus there is no plan and the deceased’s

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assets flow to the surviving spouse, less valuable. Similarly, an art sculpture, film, jewelry, weaponry, will the surviving spouse be able to attorney can impart legal advice on coins and fossils.19 A major focus address and take responsibility for how to value art for purposes such of the Qatar Museums is the local the art during the surviving as tax and estate planning. They community: local school children spouse’s lifetime or will the can also help navigate the legal visit the Qatar Museums, local surviving spouse further pass the issues that arise when executors artists are encouraged, and future responsibility onto their children and trustees are fulfilling their commissions could draw on Qatari after the second spouse’s death? responsibilities for safeguarding, talent.20 holding and disposing of art. It is With a succession plan, the important that tax and legal A DEEP COLLECTION: Beginning collector may establish legal advisors be familiar with the in the 1970s, Eli and Edythe Broad, structures to own and retain the art, requirements for appraisals and major Los Angeles philanthropists, appoint art specialists to advise on Internal Revenue Service (IRS) built a collection of some of the the art should other family policies and procedures for valuing most sought after Post-War and members not have the requisite artwork. Contemporary artists. The couple knowledge, alleviate the emotional began collecting Impressionist and association with the art given the The art community abounds with Modern works (van Gogh, Miro and collector’s death and mitigate the great collectors, all with distinct Matisse), but quickly shifted to financial burden of imminent or motivations and definitions of artists of their own generation, with future taxes. The collector may success. The following examples whom they could form personal establish a structure that owns the highlight three distinct styles of relationships.21 The collection is art and affords the collector the collecting through three celebrated deep in most artists, owning not flexibility to draft and customize the collectors. Nearly universal among one or two examples but governing documents to today’s top collectors is a sometimes more than ten memorialize the collector’s connection to a public museum or examples of a single artist. intention for the art as well as the use of a private museum space Christopher Wool, for example, is address the needs of the family in order to make their collections represented by 20 works in the and the collection. Specifically, the available to the public. Broad Collection. The Broads have specialists necessary to advise the worked with art advisor Joanne family with regard to the art can be AN ENCYCLOPEDIC Heyler to make collecting decisions identified, appointed and instructed COLLECTION: Sheikha Al since the late 1980s. Since 1984, according to the specifications of Mayassa Al Thani, sister of Qatar’s the Broad Art Foundation has run the collector. This way, financial ruling Emir, is one of the most an ambitious lending program, considerations with regard to significant collectors in the Middle sending the collection works to maintaining the collection may be East and buys both for herself and over 500 museums and galleries addressed and the emotional for the Qatar Museums in Doha, for around the world, with the mission consequences of being uncertain which she serves as chairperson. of improving access to about decisions concerning the art Her approach is to buy the finest contemporary art. In 2015, the are mitigated. example of each artist she collects, Broads opened the Broad Museum, often only purchasing a single high a 120,000 square foot storage and When planning for the transfer of quality work by a given artist. She exhibition space in Los Angeles art, consider working with a number has worked with seasoned that houses the 2,000 work of specialists who can assist in advisors, many of whom are collection.22 making a smooth transition. An house alumni, to source executor can help market the works new works for the collection. 18 She A THEMATIC COLLECTION: and determine which could be sold is a serious patron of , as Frieder Burda, a German for a reasonable price in the short well as Western Modernism and a Publisher, has a amassed a term, which should be held to vast array of other categories collection of more than 1,000 generate interest and which are including , photography, works, which is largely focused on

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German Expressionists, Abstract Strategic Planning therefore be a more involved Expressionists and his German Considerations for Art process to determine how to plan Contemporaries (including Sigmar for the eventual disposition and 23 Polke and Gerhard Richter). His For the art collector, art is an transfer of the art while considering collecting is driven by his important component of their trust, the following options: fascination with color and the tax and estate planning and may emotion that can be conveyed require the same strategic planning  No planning 24 through painting. Burda does not as other investments. Given this, it  Purchase life insurance work with dealers, but often is important to note that tax rates receives advice from art historians. are subject to change and  Sell the art He opened a museum to display therefore, clients need to consult his collection, and to host an active, qualified tax and legal advisors for  Gift the art to a non-charitable high quality exhibition schedule, any related transactions. Additional beneficiary mostly of individual artists. The care and consideration may be museum is located in Baden- necessary as an art collector likely  Donate the art to a charitable 25 Baden, Germany, and it is a major has a personal connection to the beneficiary. draw for collectors and art art after allocating time and enthusiasts. resources over many years. It may

Enjoy Art May Help Desired Art During May Help Income Recipient Life Estate Tax Tax

No Planning During life No Yes No No

Purchase Life Insurance During life No Yes Yes Yes

Sell the Art During life Yes No No No

Sell the Art At death No Yes No Yes

Gift the Art to Non-Charitable Beneficiary During life Yes No Possibly No

Gift the Art to Non-Charitable Beneficiary At death Yes Yes No No

Donate the Art to Charitable Beneficiary During life Yes No Possibly Yes

Donate the Art to Charitable Beneficiary At death Yes Yes Yes No

No Planning: While the collector due within several months of the The beneficiaries of the life will continue to enjoy the art during date of death, as may be insurance can then collect the life, this is probably the least applicable. Thus, it may be that art income tax and estate tax free desirable option. It is possible that will have to be liquidated at an proceeds (because of the ILIT) and the art will end up under the control inopportune time in the art market apply the insurance proceeds to of an estate executor and/or to pay estate taxes. pay the estate tax on the art. While distributed to family members who a collector can continue to enjoy do not share the collector’s passion Purchase Life Insurance: The the art while living, challenges for and understanding of the art. collector may establish an include matching the life insurance Additionally, the value of the art at Irrevocable Life Insurance Trust death benefit with the potential death will be included in the (ILIT) and fund it with a future value of the art at the collector’s taxable estate. It is combination of the collector’s collector’s death and aligning the important to note that without lifetime and annual gift tax beneficiaries of the art and the extensions, federal estate taxes are exclusions which can be used to beneficiaries of the ILIT proceeds. due within nine months of the date pay the premiums for the life of death and state estate taxes are insurance on the collector’s life.

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Sell the Art: Selling the collection be specified which determines the collector’s beneficiaries receive the can be done during life or after annual distribution of income back remainder transfer tax free. If set death. In either case, it is prudent to the collector. The remaining up correctly, the collector’s estate to get a professional assessment of assets in the trust at the end of the may receive an estate tax whether it is better to sell the art at term are paid to the named charity. deduction in the amount of the art an auction, gallery, or private sale. The capital gain tax resulting from contributed to the CLAT at death.28 Then it is important to understand selling the art is deferred over the which auction house or gallery life of the trust and gets distributed Gift the Art to a Non-Charitable would be most suitable for the type to the collector with the annual Beneficiary: Collectors may want to of art being sold and to then distribution of income. Once the art gift the art to their children or other negotiate fair and reasonable is sold, the collector may be eligible non-charitable beneficiary. The terms. An art professional and art for an income tax deduction but process of gifting art to children attorney may help to negotiate and only in the amount of the cost basis follows the same rules as most document the transaction. of the art because the art in the other gifting techniques. As trust will fail the related use test.27 mentioned previously, the funding If a collector sells the art during of certain types of trusts with their life then the collector will forgo If the collector intends to sell the artwork requires careful enjoyment of the art while living. collection at death then the consideration because art is not an However, the collector may control collector may enjoy the collection income producing property. Art to whom the art is sold. There is an while living however, the collector collectors may use their annual gift income tax consequence as the will not have control over who tax exclusion, which is currently collector will pay a higher capital purchases the art. It may be a less $14,000 per beneficiary per year, gains tax rate of 28% (versus 20% costly option with regard to the size and their lifetime exclusion of for financial instruments). This of a potential capital gain because 5,490,000 (for 2017) per person. A assumes the art qualifies for the beneficiaries will be the ones to gift in excess of this amount will be “capital gain collectible property” sell the art and the beneficiaries’ taxed at the 40% gift tax rate. The with a 28% tax rate as opposed to new cost basis will step up and primary planning reason for gifting qualifying for “ordinary income equal the fair market value as of art or other assets to beneficiaries property” with a 35% tax rate.26 date of death. However, it is during life is to reduce the future important to note that the art is then size of the collector’s estate as not If the collector intends to sell the art included in the estate for estate tax only the current value of the asset and is confident that it can be sold purposes. The collector’s estate but also any potential appreciation in a reasonable amount of time, documents should indicate that of the asset will be outside the then the collector may consider some expenses incurred in the estate. Unlike gifting during life, the creating a Charitable Remainder administration of the decedent’s benefit of gifting at death would be Unitrust (CRUT) to defer the capital estate may be deductible if the sale that the collector retains the art and gains tax payable from the sale of is necessary to pay debts, enjoys it during life. Additionally, the art. Funding these types of expenses, taxes or preserve the the estate planning documents may trusts with artwork requires careful estate. specify who receives the art at the consideration because art is not an collector’s death. However, the income producing property. This To potentially mitigate the estate estate tax burden will be higher. If characteristic often makes artwork tax, the collector could arrange to the gift is made during life and the a less desirable choice for funding have a Charitable Lead Annuity recipient of the art eventually sells a CRUT since timing of the sale of Trust (CLAT) be created upon the piece, the recipient will assume artwork by trust is uncertain. In a death. At death, the art would be the collector’s original cost basis for CRUT, appreciated property or the put in the CLAT, sold and the art, which will then be used to art is put in a trust, sold and reinvested. The charity receives the calculate the amount of capital reinvested. Depending on the term income flow from the trust each gains tax.29 It is important for of the CRUT, a distribution rate will year of trust term and the

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clients in such circumstances to be as grantor retained annuity trusts estate tax deduction equal to the familiar with the requirements for (GRATs) and sales to intentionally value of the art. A downside to appraisals and IRS policies and defective grantor trusts (IDGTs) gifting to a charitable beneficiary at procedures for valuing artwork for that require valuation to determine death is that the collector forgoes gift and estate tax purposes. cash flow back to the the potential income tax deduction grantor/collector may not work well during life. This may be mitigated In place of gifting to a beneficiary because generally art does not by leaving the collection to the outright, the collector may transfer generate cash flow and it is not like surviving spouse. The unlimited art into a Limited Liability Company a financial security that is marked marital deduction from the federal (LLC) or a Family Limited to market.31 gift and estate tax allows U.S. Partnership (FLP). The LLC or FLP citizens and their spouses to owns the art that is controlled by Noting the aforementioned transfer property to each other free one or more managers appointed challenges, if enough cash flow can of gift and estate taxes. One way of by the collector to be responsible be generated from the art, another transferring collectible artwork, for maintaining insurance and consideration might be a which should be reviewed with a storage as well as for making combination of a LLC and an IDGT. trusts and estates attorney decisions regarding sales. The In this strategy, the collector funds regarding specific estate planning control feature must be carefully an IDGT with cash whose value is techniques, is through basic credit crafted for estate tax reasons. The at least 10% of the value of the art. shelter and marital deduction donor may then gift LLC and FLP The collector then sells the LLC planning. This example would allow interests. The benefit of this interests to the IDGT in exchange both spouses to utilize their estate structure is it allows the transfer of for a promissory note. Because the tax exemption amounts. The an intangible partnership interest IDGT is a grantor trust, the collector surviving spouse can then receive rather than a tangible piece of the and the trust are the same for the federal income tax deduction if collection to which there may be income tax purposes and therefore gifted but gives up the benefit of emotional attachment. It also keeps the collector does not incur a keeping the art.34 the entirety of the collection capital gain. The cash to pay the together. At death, probate is interest on the note comes from the If the collector donates art during simplified because the collection is cash that originally funded the life, the IRS specifies the following owned by the LLC or FLP and IDGT as well as potentially from the with regard to charitable income tax interests are transferred rather than LLC’s cash proceeds from renting deductions 35: specific pieces of art. 30 or loaning the art (potentially to a museum). Since the IDGT owns the  If ordinary income property to However, art’s lack of liquidity and LLC, the cash is available to pay public charity then deduct up issues relating to valuation and the interest on the note.32 to 50% of adjusted gross cash flow do pose significant income (AGI) by the lesser of challenges to the utilizing of LLCs Donate the Art to a Charitable fair market value (FMV) or cost and FLPs. For illiquid assets such Beneficiary: A collector may donate basis as art, the IRS typically does not art during the collector’s lifetime or allow “discounting techniques” for at death with the clear distinction  If ordinary income property to gift or estate tax purposes. Instead, being whether the collector will be private charity then deduct up for illiquid assets, a collector may able to enjoy the art during life. In to 30% of AGI by the lesser be able to utilize the IRS “valuation either case, the collector may FMV or cost basis discount” due to the art’s lack of specify to which charitable 33  If long-term capital gain marketability. For this reason, it is beneficiary the art will be given. property to public charity then important to note that art can be deduct FMV of art up to 30% of one of the most expensive assets By donating art to a charitable AGI to transfer during life. Of note, beneficiary at death, the leveraged gifting techniques such deceased’s estate receives an

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 If long-term capital gain organization’s exempt purpose. It is steward of the gift than family property to private charity important that a collector members. However, collectors may then deduct FMV of art up to understand the future use of the mistakenly believe their donated art 20% of AGI if it is publically artwork because the nuances can will become a permanent piece in traded stock otherwise cost affect the amount of the income tax the museum of their choice. They basis is used deduction. Collectors in such assume that once accepted, their circumstances should be familiar art will be displayed and  If tangible personal property with the requirements for highlighted, or that their art will unrelated to charity’s purpose appraisals and IRS policies and become part of the museum's to a public charity then deduct procedures for valuing artwork for permanent collection and not up to 50% of AGI by the lesser gift and estate tax purposes. deaccessioned. These of FMV or cost basis assumptions may prove false. Due It is also important to understand to decreased funding, limited  If tangible personal property what type of property the artwork storage space and highly selective unrelated to charity’s purpose will be deemed for tax purposes. art acceptance committees, major to private charity then deduct Generally, a work of art held by a museums have limited their up to 20% of AGI by the lesser collector is capital gain property acceptance of works of art. It is FMV or cost basis and qualifies for deductibility at full important for the collector to fair market value if it meets the IRS regulations state that a gift of understand the long-term plan for related use rule discussed and is property other than cash or the art and create a realistic given to a public charity. The marketable securities whose value strategy. For most people, it may contribution is deductible up to 30% exceeds $5,000 requires that the be best not to focus on the largest of adjusted gross income (“AGI”) donor obtain a qualified appraisal and most famous museums. Less with any excess contribution dated within 60 days of the gift and notable organizations often have deductible over the following five that the appraisal summary be more space and additional years (limited to 30% AGI) until attached to the income tax return. flexibility. It is extremely important exhausted. for the client to make the gift By donating art to a charitable pursuant to a written agreement However, the art will be deemed to beneficiary during life, the collector that builds in flexibility, and be ordinary income property if (i) may receive an income tax provides clear terms that could be the donor created it, (ii) the donor deduction. In order to obtain a enforceable at a later date. An received it as a gift from the charitable deduction equal to the attorney or an independent art creator, (iii) it is held as inventory fair market value of the work of art, professional can help negotiate and by a dealer, or (iv) its sale would the work must be donated to a document the transaction. generate short term capital gain public charity and the donor must because it was held for one year or anticipate that the charity’s use of For collectors looking for a venue less. If it is ordinary income the work will be “related” to its to exhibit their art, preserve the property and is given to a public exempt purpose. For example, a integrity of the collection and also charity, the deduction is for cost gift of a painting to a museum receive tax advantages, basis only up to a maximum of 50% would clearly be a related use gift. consideration should be given to of AGI. However, if the work of art is creating a museum. However, a collector needs to take a number of contributed, for example, to the While a collector may gift art to any factors into consideration. First and local Society for the Prevention of charitable beneficiary, museums foremost, establishing and Cruelty to Animals (SPCA), who in are good candidates because they maintaining a museum entails turn just plans to sell the art, the may want the art, the gift results in relatively high fixed and variable amount of the deduction would be a greater income tax benefit for the costs. Clients must also understand limited to cost basis because the collector, and a museum may be a the legal and tax obligations that gift would not be related to the more effective and impactful

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come with establishing and running successful purchaser. While a many other assets. Begin due this type of organization. Most higher sales price is advantageous diligence by checking the Art Loss museums choose to establish as to the seller, the capital gain tax is Register to see if the work is listed nonprofit 501(c)(3) organizations. 28% on art in contrast to 20% for as stolen. If the identity of the seller Applying for nonprofit status financial securities. The buyer must is known, check for any liens or applies to federal, state and local also pay sales tax on the sum of “lack of authority to sell” claims in tax exemptions after the the purchase price and premium or state and local registries. Be organization is legally incorporated. commission. Finally, buyers should particularly careful with works that The process is costly and complex, take precautions necessary to have crossed borders, as they therefore the client should consult alleviate fraud including verifying might be considered another with their legal and tax advisors. In authenticity, title and country’s cultural property or have addition, collectors who have documentation. claims from art looting. Consider art families with little interest in the art title insurance to protect against the and its legacy should consider Authenticity has varying definitions full spectrum of defective title risks. donating to an existing museum depending on the genre of art. To that satisfies the collector’s be deemed authentic, a Matisse Proper documentation, as noted requirements of space, location painting must have been painted by above, is indispensable in and structure. An existing museum Matisse and perhaps equally establishing the authenticity and would be able to manage the art important for the art collector, the right to own the art intended for without relying on family members. commercially recognized scholars purchase. A standard invoice or bill and experts must concur about its of sale typically includes a Costs of Transacting and inclusion in the compendium of the complete description of the work of Holding Art artist’s body of work. An ancient art, its purchase price, sale tax, Egyptian artifact, however, may be payment instructions and notes Preparation and consideration of deemed authentic without any about who pays for shipping costs art transactions can be quite information about the artist. The and when title passes to the buyer. involved particularly in the case of best place to begin confirming The condition of a work of art significant valuations. Similar to authenticity is with provenance invariably has a profound impact on acquiring real estate, there are whereby reviewing the its value. Careful measures should numerous additional steps with documentation tracing ownership be taken to ensure art is well associated costs in addition to from the creator to the current protected and properly insured. finding, negotiating and paying the seller. Also check the object’s Threats to the physical security of purchase price. Art may have high sales, exhibition and publication art are more likely posed by transaction costs depending on history to determine whether improper transportation, storage, through which channel the art is experts have deemed the work installation and environmental being sold. While commissions may authentic. For those objects that controls. vary and are negotiable working lack a complete ownership history, through the private market with you may need to employ an expert  Art may be its most vulnerable dealers, the buyer and seller in the genre to establish when it is moved. Specialist art premiums at auction houses may authenticity, perhaps even movers are experts at shipping be as high as 20% depending on supplemented by a scientific expert and handling as well as the achieved sale price. If an artist who can date the materials. While documenting an audit trail for has a “thin” market due to few many artists’ foundations the chain of custody from point works created or available for sale, authenticated works in the past, to point. it could take months or years to some have terminated the service 36  Art should be stored art in identify a desired work of art at due to litigation concerns. facilities that have the expertise which time buyers often pay up for Valid title is more difficult to to handle them properly. the piece to make sure they are the establish in the art market than with Specialist art storage facilities

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provide a detailed facility report When determining the value of a would be required to replace a that includes information about piece of art there are numerous piece of art with another of similar fire detection and suppression, inputs to consider including the quality, age, appearance, humidity and temperature artist, type, image, medium, year, provenance and condition on short control. dimensions, condition, presence of notice. This valuation is necessary markings or signatures, for insurance purposes and can be  The physical and provenance and whether the piece thought of as retail value.40 environmental conditions in is a standalone item or part of a which the art is housed are larger set/collection. The frequency APPRAISALS: Typically, if the critical. On a regular basis, a with which art valuations are transfer of art occurs shortly after it conservator who specializes in updated depends on the type of art was purchased, its value is the cost the type of art owned should be involved and how stable its that the seller/transferor paid. consulted. valuations are. 37 Typically there However, more often than not, the are two types of valuations, fair transfer of art does not occur close Art fluctuates in value while the market value and replacement to the time the art was purchased stated coverage value in a policy is value: and thus it requires an appraisal. fixed. An art appraiser can be An appraisal is a legal document brought in periodically to re- FAIR MARKET VALUE: The fair that describes the value of the evaluate the value of the art so the market value is “the price at which artwork. For gifts to charity during collector maintains appropriate the property would change hands life of greater than $5,000, a insurance coverage. Art insurance between a willing buyer and a qualified appraisal must be is a highly specialized field, so both willing seller, neither being under obtained. The donor must receive broker and carrier have expertise in any compulsion to buy or sell and the appraisal before filing the insuring fine art and art risk both having reasonable knowledge income tax return.41 A qualified management services. of relevant facts”. 38 This valuation appraiser can be located through a is required by the Internal Revenue referral from a specialized art or Complexities of Art Service (IRS) for estate tax, income antique dealer or from a lawyer or Valuation tax and gift tax purposes. other advisors. The qualified Additionally, the fair market value appraiser should be affiliated with a While the art market is fairly serves as the basis for borrowing major appraisal organization and opaque, art is an asset and against art as collateral. If an one should check the appraiser’s therefore it is important to ascertain agreement cannot be reached qualifications. its value. Specifically, the value of between the IRS and taxpayer, art is vital not only when it comes to further assistance may be Due to the uncertainty in the sale and borrowing but also for: requested of the IRS Art Panel and valuation process, Congress the Office of Art Appraisal Services. created the IRS Art Advisory Panel  Income tax purposes if the art Further specifications for fair of 25 art experts to assist in is transferred during life to a market value include that there is reviewing art appraised for $20,000 charitable beneficiary no time constraint on the sale, the or more. The panel consists of auction house representatives,  Gift tax purposes if the art is transaction takes place in an dealers and curators. transferred during life to a non- appropriate marketplace and the buyer’s premium, the amount charitable beneficiary The importance of appraisals can above the successful bid price that be seen through the tax penalties  Estate tax purposes if the art is is paid as part of the total purchase that are imposed in the case of owned at death price at auction, is included.39 inaccurate valuations:  Insurance purposes if the art is REPLACEMENT VALUE: The  For income tax purposes, a maintained during life replacement value is the “substantial misstatement” reasonable dollar amount that

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occurs if the value is overstated less attractive liquidity option, structure of the art market has by 150% or more, in which as at a time when prices are evolved thus bringing with it more case a penalty of 20% of the falling the percentage of art opportunity, information and underpayment of tax is added “bought in” or potentially responsibility. Therefore, it is to the tax. A “gross valuation “burned” at auction increases. prudent for a collector to recognize misstatement” occurs if the art on a balance sheet and plan value is overstated by 200% or Additionally, borrowing rather than accordingly. more, in which case a gross selling allows the collector to retain penalty of 40% of the ownership of the art for enjoyment The value of global art market underpayment is imposed. purposes as well as retaining the sales in 2016 was $56.6 billion, in (The higher the value of the art potential future appreciation in 2015 it was $63.6 billion and in donated, the potential for a value. Finally, borrowing assists in 2014 it was $68.2 billion. Although higher income tax deduction.) avoiding a potential public sale thus 2016 is the second year of preserving confidentiality. declining sale values, representing  For federal estate and gift tax a 17% decrease from 2014, 2014’s purposes, if the stated value of Approximately 53% of collectors $68.2 billion in global art market the art in the estate is 50% or who expressed an interest in art sales represents a peak that less of the restated value then secured lending said their surpassed the previous $66 billion the penalty is 20% of the tax motivation would be to buy more record in 2007.46 Of the $56.6 underpaid. The percentage art, while 38% said they would use billion in 2016 global art market penalty increases to 40% if the the proceeds to invest in other sales, 57% or $32.5 billion was stated value is 25% or less business activities and 9% said through dealers and 39% or $22.1 than the restated value. (The they would use the proceeds to billion was through auctions. Art 43 lower the value of the art in the refinance existing loans. Fairs represented 41% or $13.3 estate, the lower the estate billion of dealers’ sales. 43% of Understanding Art as an tax.) 42 total auction sales were from two Asset auction houses: Christie’s with $5.4 BORROWING: Loans secured by billion and Sotheby’s with $4.1 This discussion intends to bring art may enable collectors to avoid billion. Total online sales were $4.9 awareness to the significant role art the significant transaction costs billion and include pure online sales may play in the context of a and taxes associated with the sale ($2 billion) as well as those collector’s overall wealth. of art. Specifically: attributable to auctions ($300 Generally, a collector may segment million) and to dealers ($2.6  Long-term federal capital gains wealth between financial assets billion).47 tax on art is currently 28% and other possessions such as art, versus 20% for financial however, art has become Additionally, of the $56.6 billion in securities increasingly more accepted as an 2016 global art market sales, $22.9 asset given “art transactions have billion or 40% were in the USA, $12  State and local taxes can result recently accounted for over $60 billion or 21% were in the UK and in a total tax bill of 40% or more 44 billion annually,” art prices have $11.6 billion or 20% were in China on the gain increased 50 to 100 percent over leaving the other 19% or $10.1 the past 50 years so art originally billion of sales in regions with  Selling costs, such as an purchased to decorate a home may developing art markets.48 The auctioneer’s or dealer’s 45 now be extremely valuable and it regional sales are reflective of the commission, may be as high as is estimated that over $1 trillion 32.9 million millionaires globally 20% of the value of the item worth of art is held in private hands. whose net worth approximated sold It is important for a collector to $117 trillion in 2016. Of them, 20  Selling in an unstable understand that the size of the art million millionaires have been economic climate may be a market has increased and the created since 2000, most are from

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developing countries and  $1.8 billion for hospitality and price or through a well-established approximately 40% of them have travel artist likely to hold their value. been active in the art market in the While it is not known what portion past two years. Finally, according  $1.5 billion for professional of the $56.6 billion sales of art is to the Wealth-X Billionaire Census fees (lawyers, auditors, banks attributable to non-financial versus in 2016, it is estimated that there etc.) financially motivated collectors, in are approximately 2500 billionaires “The Art Market 2017” report by Dr.  $2.3 billion for information globally representing approximately Clare McAndrew, collectors were technology 49 $7,500 billion in wealth. Of this asked to rank considerations for billionaire wealth, 33% is in North Increasingly more information purchasing art and they are as America, 22% is in Asia and 30% is about the art market has been follows: in Europe. The Asian billionaire published. For example, in 2017, 1. Aesthetic and decorative wealth saw the largest year over Dr. Clare McAndrew published a considerations year increase of 20% in 2016. new report, “The Art Market,” in which there are vast amounts of Art, law, financial and other firms 2. Emotional information about the size and have been making strides and reasons/passion/expression of structure of the art market based increasing staff in the art advisory personality on public and private sales. This area to help collectors evaluate publication is in addition to other 3. Support of artists and their art and the potential previously published noteworthy culture/preserving or promoting consequences of the exposure. In reports: “The European Fine Art cultural values 2016, there were approximately Foundation Art Market Report” from 310,000 businesses operating in 4. Protecting and maintaining Dr. Rachel A.J. Pownall and “The the global art market employing family traditions and heritage Art and Finance Report” by approximately three million people. Deloitte. The generation of these Additionally, another approximately 5. Expected financial and other art market reports are 300,000 people were employed by appreciation/return on evidence of heightened curiosity businesses providing ancillary art investment and demand for art market services worth almost $18 billion for information. 6. Social/event-driven reasons the following: For many collectors, an investment 7. Portfolio diversification/risk  $3.6 billion for advertising and in art is only a byproduct of their benefits marketing collecting. They build their 8. Hedge against inflation/capital  $4.0 billion for Art Fairs collections based on their own tastes, a theme or even a sense of preservation/value  $1.0 billion for conservation cultural duty. Most would prefer not maintenance and restoration to see the value of their collections 9. Status/cultural credibility fall, but they have no specific  $1.4 billion for insurance and investment return in mind. Other Irrespective of the consideration for security collectors, perhaps a minority, buy owning art, every collector should with an expectation of financial  $2.2 billion for packing and be aware not only of the unique return, whether through a young shipping qualities of art as an asset but also and promising artist at a bargain the responsibility of owning art.

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Alternative investments are often speculative and include a high degree of risk. Investors can lose all of a substantial amount of their investment. They may be highly illiquid, can engage in leverage, short-selling and other speculative practices that may increase volatility and the risk of loss, and may be subject to large investment minimums and initial lock-ups. They may involve complex tax structures, tax inefficient investing and delays in distributing important tax information. They may have higher fees and expenses that traditional investments, and such fees and expenses can lower the returns achieved by investors.

Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Funding investments backed by Art are subject to market fluctuations, creditor risks and other risks associated with the management of art institutions and public view.

Added considerations of holding Art can be illiquidity and marketability, carrying costs, insurance costs, liquidity risk, uniqueness and direct comparables limitations, transaction infrequency, selling costs, authenticity as well as other risks inherent to the art market.

Fine Art Indices are limited in that they do not include private sales and only report on public markets and used a repeated sale methodology.

CRC 1803442 05/17

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1 Rachel A.J. Pownall, “TEFAF Art Market Report 2017”, The European Fine Art Foundation, 2017, www.tefaf.com/report (23). 2 Christie’s, http://www.christies.com/. 3 Sotheby’s, http://www.sothebys.com/. 4 Art Basel, https://www.artbasel.com/. 5 Sotheby’s, http://www.sothebys.com/. 6 Artnet, http://www.artnet.com/. 7 Artprice, https://www.artprice.com/. 8 The Economist, “Qatar’s Culture Queen”, 31 March 2012, http://www.economist.com/node/21551443. 9 The Fine Art Group, https://www.fineartgroup.com./ 10 Bloomberg News, “NY Apartments, Art Top Gold as Store of Wealth, BlackRock Chief Says,” 21 April 2015, http://www.etfa-mag.com/news/n-y-- apartments--art-top-gold-as-stores-of-wealth--blackrock-chief-says-21449.html?section= 11 Blackrock, https://www.blackrock.com/uk/individual/resources/investment-guides/understanding-investments/asset-classes- explained?siteEntryPassthrough=true&locale=en_GB&userType=individual, 2017. 12 CFA Institute, Toward Defining an Asset Class (Digest Summary), 1999. 13 Morgan Stanley Smith Barney LLC, http://www.morganstanleybranch.com/public/projectfiles/53fad1c6-ae3b-4256-9671-9b459e8274ac.pdf, 2014. 14 Case Shiller, http://us.spindices.com/index-family/real-estate/sp-corelogic-case-shiller/ 15 “Sotheby’s Acquires the Mei Moses Art Indices,” 2016, http://www.sothebys.com/en/news-video/blogs/all-blogs/sotheby-s-at-large/2016/10/sothebys- acquires-mei-moses-indices.html 16 Kathryn Tully, “How Useful are Art Indices,” Forbes, 5 September 2014, https://www.forbes.com/sites/kathryntully/2014/09/05/how-useful-are-art- indices/#6f3234ef4a4c. 17 Beautiful Assets Advisors LLC, Insights On Art Market Financial Performance Through 2013 Based on the Mei Moses Family of Collecting Category Art Indexes by Mei and Moses, 14 February 2014, www.artasanasset.com. 18 Robin Pogrebin, “Qatari Riches are Buying Influence,” The New York Times, 22 July 2013, http://www.nytimes.com/2013/07/23/arts/design/qatar-uses-its-riches-to-buy-art-treasures.html. 19 Qatar Museums, Collections, https://www.qm.org.qa/en/collections. 20 The Economist, “Qatar’s Culture Queen,” 31 March 2012, http://www.economist.com/node/21551443. 21 Connie Bruck, “The Art of the Billionaire,” The New Yorker, 6 December 2010, http://www.newyorker.com/magazine/2010/12/06/the-art-of-the-billionaire. 22 The Broad, Collection, http://www.thebroad.org/art/christopher-wool. 23 “The Artnet News Index: The World’s Top 100 Art Collectors for 2016, Part One,” artnet news, 13 June 2016, https://news.artnet.com/art-world/artnet- news-index-top-100-collectors-part-one-513776. 24 Museum Frieder Burda, Collection, https://www.museum-frieder-burda.de/en/museum/collection/. 25 US Trust, “Your Art Collection and Legacy Planning,” 2013 (2) 26 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (56). 27 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (95). 28 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (117). 29 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (67-68). 30 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015. 31 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (70-71) 32 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (75-82). 33 Beth Smith, “The Art of Donating Art”. 34 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (115). 35 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (86-87). 36 Jerry Garner, Morgan Stanley Lifestyle Advisory 37 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (27). 38 Cornell University Law School, “Valuation of Property, in general” https://www.law.cornell.edu/cfr/text/26/25.2512- 39 Branch Banking and Trust Company, “Planning for Art and Collectibles” https://www.bbt.com/wealth/retirement-and-planning/planning-and- guidance/planning-for-art-and-collectibles.page 40 Venable LLP, “Art is Long, Life is Short: Estate Planning For the Artist and the Art Collector,” May 2012. 41 Ramsay H. Slugg, “Art Collectors and Their Advisors”, ABA Publishing, 2015 (22). 42 www.irs.gov, IRC 6662(e) and 6662(g). 43 Andrew Blackman, “Art Plays a Growing Role as Collateral”, The Wall Street Journal, 14 June 2015. 44 Anna Louie Sussman, “Is Art an Object of Passion or an Asset Like Any Other?” https://www.artsy.net/article/artsy-editorial-art-object-passion-asset-other. 45 Jianping Mei and Michael Moses “Wealth Management for Collectors”, Journal of Investment Consulting Vol. 11, No., 12 October 2010 (50-59). 46 Dr. Clare McAndrew, ©Arts Economics, “The Art Market 2017”, An Art Basel and UBS Report, by Arts Economics. 47 Dr. Clare McAndrew, ©Arts Economics, “The Art Market 2017”, An Art Basel and UBS Report, by Arts Economics. 48 Dr. Clare McAndrew, ©Arts Economics, “The Art Market 2017”, An Art Basel and UBS Report, by Arts Economics. 49 Dr. Clare McAndrew, ©Arts Economics, “The Art Market 2017”, An Art Basel and UBS Report, by Arts Economics.

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