What the Trump Tax Plan Means for Art Collectors and Dealers

The Trump Administration’s latest release of its proposed tax reform remains sparse on specifics, but the little that is known indicates possible implications for art-related businesses and art collectors. The most recent proposal would eliminate some currently-allowed itemized deductions, lower the number of tax brackets from seven to three, eliminate the estate tax, and change tax rates for smaller businesses.

A repeal of the 40% estate tax on estates valued at over $5.49 million would substantially change the manner in which many who own significant art collections or art pieces manage and distribute their estates. The absence of the 40% tax might encourage collectors to reconsider possible beneficiaries as there would be little need to accommodate paying the hefty tax on a highly illiquid asset. While the abrogation of the estate tax may appear to be all sunshine and open meadows, some are pointing to rain clouds on the horizon.

Under current law, beneficiaries receive a step-up in basis on art received through bequests, so capital gains earned by the original owner have no income tax implications for the beneficiary. Because the newest tax proposals do not seem to address this issue, there is some concern that beneficiaries may end up paying more in capital gains, which mitigates the substantial savings that would be earned with the removal of the estate tax.

See Anna Louie Sussman, What the Trump Tax Plan Means for Art Collectors and Dealers, Artsy, September 29, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.