Daily Money Tip: When art is more than just a pretty picture

"Three Studies of Lucian Freud" (1969) by Francis Bacon set an auction record. Owning art can have tax consequences.
"Three Studies of Lucian Freud" (1969) by Francis Bacon set an auction record. Owning art can have tax consequences. (Christie's Images Ltd.)
Posted: January 21, 2014

When is art an asset? When it provides future benefit, and when you sell your art and make money.

Financial advisors are taking note of the bull market in art. In December, a Francis Bacon painting, Three Studies of Lucian Freud, sold for $142 million, the most expensive artwork at auction.

Freeman's auction house in Center City will host a panel of art and tax experts on Thursday, including Antiques Roadshow appraisers Alasdair Nichol and Scott Isdaner, managing member of Isdaner & Company CPAs. They will address tax and estate implications of owning, selling and donating art. These determine the value of your asset for you and your heirs.

"I've been a collector of works on paper for 30 years, so I love art," said Isdaner. "But if you build a valuable collection, it can be taxed heavily when you die, and your heirs may not have the cash to pay the tax. Often, if they don't donate to a museum, heirs are forced to sell to pay the estate tax."

What are some factors in determining value? The artist is key. Andy Warhol, for example, is among the world's top sellers. Other factors are provenance, the rarity, and, of course, the sales history, according to Anita Heriot, president of Pall Mall Advisors. She spoke at Freeman's last autumn for Abbot Downing, the private wealth-management division of Wells Fargo.

In a recession, certain types of art tend to fall in value, such as decorative arts, furniture, and what she called "second-tier" paintings. "Blue-chip" paintings, on the other hand, retain their value, much like blue-chip stocks, she said.

Chinese and Russian billionaires have entered the global art market, pushing prices to stratospheric levels.

"Asians are paying huge prices," Heriot said, but not for the pieces you might think. "They want to buy back their heritage, that power and grandeur," she said, and they also pay up for Chinese contemporary art and classic paintings such as Pierre-August Renoir or Jackson Pollock.

The top artists in 2011 by sales revenue? Warhol, and two Chinese artists: Qi Baishi and Zhang Daqian.

A white jade seal, or stamp of the imperial palace of the Qing Dynasty, was found in a Main Line home and valued at $50,000, Heriot said. But at auction, an Asian buyer paid $3.5 million for the one-inch by one-inch piece of jade.


erinarvedlund@yahoo.com

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