museum collections in america… the tax

OpinionJournal – Taste:
This fall, the nation’s art museum directors have been in a state of near panic over a surprise change in the tax laws that, they say, has curtailed their ability to build their collections.
Until the Pension Protection Act of Aug. 17, museums could entice donors with a fractional gift. A collector could give his Rembrandt a little at a time, say 20% each year, then take a tax deduction based on that percentage of its value every year for five years. The museum could show the painting for 73 days—20% of 365. If the value of the artwork went up from one year to the next, so would the deduction.
But the new law has changed the rules. Deductions no longer increase with value, but they do decline when value goes down. Also, the museum must take “substantial possession” of the object within 10 years. Otherwise the donor must refund his deductions, with interest, and pay a 10% penalty.
Dean Zerbe, senior counsel for the Senate Finance Committee, told the New York Sun in September that the law was changed to stop abuses. “Very wealthy people were taking huge deductions and keeping the art at their homes.”
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personally, i think museums should avoid selling their collections… but they do need operating capital sometimes….