In a classic case of mo’ money, mo’ problems, when Lise Wilks recently sold a Basquiat painting for a whopping $85 million, Uncle Sam was surely watching.
Wilks just sold a collection of her late parent’s artwork at Sotheby’s for $110.5 million, and in case you were wondering, owes about $37 million on the profits to the tax man.
Fortunately, for those in Wilks well-heeled shoes there are ways to reduce the amount you hand over to the IRS. Bloomberg offered the following advice.
Donate to a museum: Gains can be offset by charitable donations of cash or art during the year of the sale or carried forward from prior years. Fun fact: donations can offset up to 50 percent of the donor’s income with a limit of 30 percent for certain private foundations.
Buy more art via 1031 exchange: Art investors can defer capital gains taxes by taking advantage of a Section 1031 exchange — using gains to buy more art.
But the bottom line is that you have to give to get… tax breaks, that is.
“If they are lucky enough to have a bonanza like that, they should plan on becoming more charitable,” said Ralph Lerner, an attorney who has negotiated major art transactions.
It appears, Wilks is already hip to these tactics. The Lise and Jeffrey Wilks Family Foundation made $301,650 in grants and gifts in the year ending on July 2015.