Titanic artifacts to be auctioned 100 years after ship sank

The company that owns the largest collection of artifacts salvaged from the Titanic's demise is planning on auctioning the items in a single lot in 2012, which is the 100th anniversary of the ship sinking.

Premier Exhibitions Inc., which owns RMS Titanic Inc., the ship's salvor, has stated that the 5,500 items in the lot have an estimated value of $189 million, according to The Associated Press. The value provided by the company is derived from a 2007 appraisal and does not account for intellectual property that was obtained from a 2010 expedition that explored the site of the debacle. CNN Money reports that the artifacts are currently being exhibited at several locations worldwide.

A group of people led by oceanographer Robert Ballard found the site of the accident in 1985, The Associated Press reports. Items were recovered from the wrecked vessel in 1987, 1993, 1994, 1996, 1998, 2000 and 2004.

The auction is scheduled to occur on April 15, 2012 - 100 years to the day after the ship hit an iceberg in the North Atlantic ocean, which resulted in the death of more than 1,500 people.

The auction still needs to be approved by a Virginia-based federal judge, The Associated Press reports. When contacted by the media outlet, a spokesperson for the auction house did not comment on the impending sale of property. U.S. District Judge Rebecca Beach Smith has declared RMS Titanic the owner of the artifacts collected during the trips to the ship. She has determined that the company is entitled to being compensated for the items, but has not decided how RMS Titanic will be paid.

Investors who wish to participate in antique auctions such as the one involving items retrieved from the Titanic can realize tax benefits when buying and selling the rare items. These individuals can realize substantial cost savings by setting up 1031 exchanges with a qualified intermediary such as Strategic Property Exchanges, LLC as long as they buy and sell these items in a way that qualifies as a like-kind exchange.

Although various benefits can be derived from setting up a 1031 exchange when engaging in transactions involving antiques, one major draw is that investors who use the exchanges can defer taxation on items sold. Postponing paying income taxes on the antiques sold will allow the investors to retain all the equity that existed when the items were sold.

The benefit of retaining this equity is most easily exemplified by its impact on debt payments. These payments are made out of operating income, which can be taxed at rates as high as 40 percent. An investor who retains all equity in the antiques sold will need less leverage to purchase the replacement items. This lowering of debt will cut both interest costs and debt payments.

To provide an example, let's say that an investor owned rare currency worth $2,000 and wanted to sell it. The individual finds a replacement item that will qualify as part of a like-kind exchange. He finds a buyer for his item, and then works with a qualified intermediary to set up a 1031 exchange on the sale. He avoids paying income taxes on the currency sold, and retains all equity he had in the item.

One final benefit of setting up 1031 exchanges with qualified intermediaries is that there is no limit on the number of times they can be used. An investor who owns antiques can use these transactions whenever appealing auctions are announced.