According to Josh Baer, “You can defer millions of dollars of taxes,” with the like kind exchange for high-end art.Experts say the use of this tax break has expanded in response to surging prices for art and the rising number of savvy investors, often veterans of the real estate industry or Wall Street, who have come to view paintings and sculptures as tradable commodities.
1. What is a like-kind exchange? Explain.
2. What was the like-kind exchange originally created for?
3. If this loophole is eliminated, how much in additional tax collections could the Treasury gain?
4. Give an example of how an art collector would use this loophole. Include as much detail as possible.
5. Discuss…do you think that the loophole should be eliminated? Why or why not?
Bowley, G. (2015) Tax Break Used by Investors in Flipping Art Faces Scrutiny. The New York Times, April 26 (Retrievable online at http://www.nytimes.com/2015/04/27/arts/design/tax-break-used-by-investors-in-flipping-art-faces-scrutiny.html?rref=homepage&module=Ribbon&version=origin®ion=Header&action=click&contentCollection=Home%20Page&pgtype=article)