Accountants and the Art World: From Supporting Artists to Recording Assets
Frances Dittmer, who built an art collection at the now bankrupt Refco, Inc., a company her ex-husband Thomas Dittmer founded, said she thought that “as long as we have to put something on the wall, it might as well be good art,” the Chicago Tribune reports. Many in business, including accountants, share her point of view, embarking on long-term, often supportive relationships with artists, eventually becoming collectors.
PricewaterhouseCoopers LPP (PwC) became acquainted with the work of Daniel Terdoslavich through leasing his paintings from a gallery, a practice that gives artists greater exposure. PwC bought his existing work and commissioned 63 new paintings from him after leasing, American Artist
“I much prefer selling to leasing my work,” Terdoslavich said, “but if leasing leads to selling that’s fine with me.”
Other artists who have participated in art-leasing programs have enjoyed similar success, the American Artist adds.
The “noncommitment” aspect of art leasing works well for businesses, because with high turnover among decision-makers, it offers new owners the chance to trade for something totally different, Polly Larsen, owner of the Larsen Gallery in Scottsdale, Arizona, told the American Artist. In addition, if companies want to purchase leased art, the cost of the lease is subtracted from the purchase price.
Some artists can now look to the newly formed Artists Pension Trust for an investment nest egg. The Trust, which invites young artists to contribute up to 20 pieces of their work to a tax-protected fund for 20 years, assumes that some of these works will appreciate in value, the New York Times reports, and some of the income will go to the artists. Investors, who hope to establish trusts in 10 cities, receive 20 percent of the trust income, and the rest is divided among the artists. Successful artists receive half the appreciation in their work; less successful artists, the rest.
“There are tons of extremely well known artists who are practically destitute,” Kiki Smith, an artist, who is one of the Trust’s advisers, told the Times. “Most artists live with tremendous insecurity about their future in terms of money. It’s like being in a free fall their whole lives.”
For one artist who needed to pay the bills, the solution has been setting up a small business to support her art. Linda O’Neill, an artist living outside of Boulder, Colorado, took in a dog from a rescue shelter and painted his portrait, leading to the decision to set up a dog portrait business, USAToday reports. Her advice to other artists is to do what you love and market it, and then market it some more.
The long-established tradition of large companies building art collections can lead to some thorny accounting and legal issues. Robert Fitzpatrick, director of Chicago’s Museum of Contemporary Art (MCA), is attempting to claim an Andreas Gursky photograph from the Refco collection, before it is sold to satisfy Refco’s creditors.
In a court filing, reported by the Chicago Tribune, the MCA said that the Matthew Marks Gallery in New York sold the print to Refco in 2002, at below market price, on the condition that it would be donated to the museum by December 31, 2007. Refco gave the museum a 10 percent interest in the print, giving the company an immediate tax benefit.
The Riggs Bank collection of Impressionist art, formed by former CEO Joe L. Albritton, is also currently for sale, as part of the merger agreement between Riggs and PNC Financial Services Group, the Washington Post reports. Riggs never discussed how much money was spent on art purchases, although one Manet was reportedly purchased for $3 million, because the value of a single painting would not affect its financial position. From an accounting perspective, Riggs “capitalized” the purchases as assets on the balance sheet and they never depreciated.
While Albritton loved his art, PNC didn’t, the Post said, and it has included the paintings among other non-producing assets, such as a Gulfstream V jet, heading for the auction block.
The sellers, if successful, will pay capital gains taxes, of 28 percent, on the “art and collectibles” investment type, according to Art and Antiques. “Artists and collectors are being punished by the current tax code,” says Sen. Pete Domenici, (R-NM) who introduced a bill in June that would extend the 15 percent maximum to cover art and collectibles.