Does a knife qualify as a work of art?

Hope Diamond Est. Value- $350 Million

Hope Diamond Est. Value- $350 Million

It used to be wealthy collectors could donate their works of art for a tax break.  Then the 2006 Pension Protection Act came along preventing donors from realizing the tax benefits on the appreciation of the art’s value and limited the time to complete the donation. So, with a stroke of a pen donations dried up.

The Weekend Edition of the Wall Street Journal in its article Restoration Work on Gifts of Art reports wealth advisers and estate lawyers stopped recommending the practice soon after the act became law.

Now, several in Congress are coming to the rescue by proposing changes in the 2006 law at a time when artwork is declining in value. In fact, the art market has dropped 30% so far this year and is approaching 2004 values, according to Mei Moses Art Indexes.

Is what we have here an art bailout?

With that said, is what we really have here an art bailout? The specifics get complicated, but real interesting. Did I tell you under the proposed changes the donor can make incremental donations of the piece of art over 20 years? This provides for the collectible to increase in value and provides increasing tax breaks to the donor as it appreciates. And then the one that got me- the museum is only required to exhibit the artwork proportionate to the incremental ownership interest gifted over every five year period, which means the donor can keep it for however much time not gifted. In other words, he can give it and then keep it- at least most of the time. I like that one.

My gracious, this sounds like a couple good ol’ boys got together one evening at their favorite Washington establishment and devised a tax break scheme for their ultra-wealthy hunting buddies.

knifemuseumThe question we only care about is- Does a knife qualify as a work of art? I might be willing, as some of you, to gift a knife to the National Knife Museum if I can keep it for most of the allowed 20 year “gifting period” and account for its appreciation too by realizing additional tax breaks.

I am sure there is some limit on the initial value of the piece of art to like, a million dollars, or something like that, so even if our knife is ultimately accepted as art, it won’t qualify.

Guess I’ll just go cut something with mine then and let the uber-rich keep their gifts.

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