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Abstract: 

When they first begin to purchase art, few collectors consider developing a comprehensive plan to build a collection. Even fewer consider tax-efficient strategies. As their collection grows in size and value, collectors need to protect themselves from paying sizable capital gains taxes whenever they decide to sell an object, and protect their heirs from possibly onerous estate taxes upon death. Often, the only way the couple knows to minimize taxes is to donate the artwork, frustrating their ability to enjoy and control the collection. This article explores an option to resolve this quandary by illustrating the use of a private operating foundation as an effective means to facilitate several primary goals collectors typically have: enjoyment, preservation,and tax efficiency. Thus, they achieve “double exposure”—still seeing the collection after giving it away.

Keywords: Private operating foundations; IRC §170(b)(1)(B)

Affiliations:  1: Horwood Marcus & Berk, Chartered.