First Editions, Artwork and Collectibles

Ian Fleming’s first edition of Casino Royale, the first James Bond novel to be published in 1953, has an estimated value between £20,000 and £25,000.  It is less known that Fleming himself was an avid collector of first editions, ranging from the Communist Manifesto and Mein Kampf to Marie Curie’s Paper on the Isolation of Radium.  Ironically, the collector has become the collected.¹

The good news is that, despite the doom and gloom surrounding the financial markets, the market for artwork and collectibles continues to be strong in the US as well as overseas.  On September 18, 2008, a two-day sale of artwork by Damien Hirst set a new record for an auction dedicated to one artist of £111 million, according to Sotheby.  Sotheby's stated  that the  previous record set in1993 for 88 works by Picasso had stood at US$20 million.

There is better news for collectors and owners of artwork and other collectibles that sell these types of investments and choose to reinvest in additional artwork and other collectibles.  Treating the sale and purchase as a "Section 1031 Exchange" can defer the estimated 35% to 40% gains tax imposed on the sale of these items.  These types of assets include lithographs, oil paintings, watercolors, sculptures or other graphic forms of art, precious metal coins and the like.

Furthermore, the acquisition of the works of art or other collectibles does not need to take place at the same time or with the same dealers.  The transaction can be structured to take place over a period of time not to exceed 180 days.  The purchase can take place either before or after the sale.  

While Section 1031 Exchanges have been available for many years, the Internal Revenue Service has provided very little guidance or authority on what kinds of investment assets were considered like-kind.  Further, the IRS National Office stated they will not provide guidance on these issues unless "forced to do so on audit."

Many questions can arise in the context of a Section 1031 Exchange.  Is the property sold considered like kind to the property purchased?  Was the property held for investment or for sale?  How do you treat debt on the exchange?  How are exchanges of multiple assets treated?  What if the seller wants some cash out of the transaction?  Are sales subject to sales taxes?  Can the collector be protected from mistakes or errors of judgment in an Exchange? 

We know that Section 1031 Exchanges are complicated.  We  know that it is easy to make mistakes and have to pay penalties and interest as well as taxes on a botched Exchange.  That is why we have an iron-clad service guarantee to protect our Customers from Errors, Mistakes, Tax penalties and Interest.  We prepare your tax forms,  provide a Tax Opinion   and  guide your staff  and Advisors  through the entire process  from start to finish.  Let us Minimize your Taxes and Maximize your Cash.

Upcoming Seminars

October 29, 2008 Indianapolis, IN

Advanced Section 1031 Exchanges-Event# 45618

8:30 a.m.-4:40 p.m.
www.nbi-sems.com

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November 5, 2008
St. Louis, MO
(near Clayton, MO)

Advanced Section 1031 Exchanges-Event# 45201

"Maximize Your Effectiveness during these
Advanced Property Transactions"

8:30 A.M. - 4:40 P.M.
www.nbi-sems.com

Toll Free: 800-427-7212
Phone:  513-412-3481
Fax:  513-412-3482
Email: steve@spe1031.com
Website: www.spe1031.com