Republican Tax Bill Proposes End of Like-Kind Exchanges for Art Collectors by Barry M. Brant, CPA
Posted on December 05, 2017 by Barry Brant
Current tax laws allow business owners and investors to defer recognition of capital gains tax when they use the proceeds from the sale of one asset to purchase a similar asset of equal or greater value within a period of 180 days. Traditionally, this reinvestment of capital has allowed qualifying taxpayers to avoid or defer significant federal and state income taxes on the sale of appreciated investment property, such as artwork and other valuable collectibles, the gains from which are taxed at 28%. However, under the Republican’s proposed tax reform plan, this preferential treatment of 1031 like-kind exchanges would be limited solely to real estate investment property and no longer apply to collectibles effective with sales on or after Jan. 1, 2018.
This does not bode well for art investors, because the GOP bill aims to eliminate tax-deferred treatment for the exchange of appreciated personal property. Therefore, collectors of art, coins, cars and other collectibles should consider accelerating any planned asset sales and lodging the proceeds with a qualified intermediary before year-end. This will provide ample time to purchase replacement property within the required 180 day period (even though it will fall into 2018) and defer tax on sales occurring prior to December 31, 2017.
The advisors and accountants at Berkowitz Pollack Brant have significant experience assisting collectors with tax-free exchanges of art and other types of collectible personal property. Our team works to bring the best solutions to clients for their income and estate planning needs.
About the Author: Barry M. Brant, CPA, is director of Tax, Consulting and International Services with Berkowitz Pollack Brant, where he leads the firm’s private client group and provides guidance on complex tax matters, including multi-national holdings, cross-border treaties and wealth preservation and protection. He can be reached in the CPA firm’s Miami office at (305) 379-7000, or via email at firstname.lastname@example.org.