Not all donations will qualify for tax breaks.
Are you considering donating art to receive a tax break?
You should know the how the donation may impact the tax break as much as the donation itself.
Yes, you can push the system too far.
When it comes to tax law, pigs live and hogs get slaughtered.
Best to stay piggish.
According to the New York Times article titled "Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge," a wealthy Canadian is in the midst of such as situation.
Famous photographer Annie Leibovitz was in financial trouble.
Someone arranged for the sale of 2,000 prints from Leibovitz to a wealth Canadian.
The Canadian would purchase the art for $4.75 million then donate the prints to a museum in Nova Scotia.
It seemed like a win-win.
The artist would get out of financial trouble and the wealthy donor would receive a tax break.
What was the issue?
The issue is the paintings would qualify the donor for a $20 million tax break.
This number is quadruple what he paid for the prints.
Regulators have rejected the application for the tax break from the museum on three separate occasions.
The museum is now on its fourth application.
Could this happen to you?
Rules in the United States are different than those governing Canada.
Still, a method like this could be heavily scrutinized.
The IRS keeps an eye out for hogs when it comes to tax deductions.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: New York Times (July 25, 2017) "Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge."