Art collecting is a pastime that is regularly engaged in by the well-to-do and others who appreciate the best in human culture. Do you love fine art but feel intimidated by your lack of knowledge? Would you like to know more and become an art aficionado? Are your clients asking for help with managing their art collections–including buying it, donating it, or passing it on to heirs? The opportunity is yours if you can understand how to collect and protect your artwork and to advise clients how to do so. To begin, let’s set some basic rules for art collecting:
Art is for enjoyment Studying art in school is okay, but observing it at museums and galleries is the only way to appreciate it.
Educate yourself Read newsletters or trade magazines about art, such as ARTnews, Art on Paper, Art in America, Art & Antiques, and Smithsonian, and attend exhibits. By showing enthusiasm for the art at those exhibits, you will attract the interest of more experienced and knowledgeable people who will share their expertise with you. By becoming saturated in original art, you will gain expertise and confidence in understanding and appreciating the works’ different styles and materials.
Don’t count on art being a good investment This is a corollary to the first rule. Maybe in 25 years a work will increase in value 500 times, but that’s unlikely. However, many people do acquire art assets during their lifetime. A majority of wealthy Americans purchase art and attend antique auctions as a lifestyle activity. Eventually, these individuals will need professional expertise regarding valuation, authentication, disposition, protection, transfer, insurance, conservation, transportation, or conversion of art assets to cash.
Collect the work of living artists By focusing on collecting the works of living artists, you will be assured of buying an authentic piece of work and will have great satisfaction in supporting a favorite artist.
Beware of fakes and reworked pieces Be wary of unscrupulous dealers who delight in scamming artists and collectors. Never be demoralized by your lack of knowledge but always be willing to educate yourself about various types of art. Advise your clients to enroll in art history courses and become familiar with local museums. Consult with academics, curators, or art appraisers who can offer advice and referrals regarding a particular need. The International Association for Professional Art Advisors is a not-for-profit association comprising many of these art-service professionals who can provide technical assistance.
Beware of auction houses as a source of art Bids can be inflated and you or your client can accidentally become the owner of an expensive item that you never wanted and can’t get out of buying.
Since collecting art is considered a hobby and the collector does not purchase art for resale, he therefore pays state and local sales taxes. It is important that the bill of sale summarizes all the details of the piece of art, including the artist, title, description, date, vendor and price. It is important to maintain all records for reference in the event of a future donation to charity or capital gain sale. When a collector donates art to a museum, the fair market value of the deduction is identified as a charitable donation and Federal Form 8283–Noncash Charitable Contributions–is filed with her personal tax return. A common mistake is to accept a gift from the artist who created the work. In this instance, the valuation is limited to the artist’s cost of materials and there is no consideration on the holding period or the appreciated value of the work. It is best to advise your client to pay for any artwork by check and obtain the dated sales invoice for all purchases.
If your client donates an item worth more than $5,000, he must obtain a qualified appraisal within 60 days prior to the donation date in order to claim the deduction on his tax return. If the client maintains a valuable art collection, the appraisals are useful for estate planning purposes as well. Life insurance can be the most effective estate planning tool to fund the tax liability on a capital gain valuation.
How to Buy Art
It is common to purchase art through a dealer, but this can be very expensive because of the promotional and overhead costs incurred by the dealer. Instead, if your client likes a certain artist, it is best to contact him directly and visit his studio. The artist may have paintings too large for display in the client’s home but may have some preliminary sketches, black or white versions of colored oils, charcoal drawings, watercolors or other hidden treasures stacked somewhere in his studio. The quality of paper may not be the type one would find in a final product but, nonetheless, it is a way to buy art at more reasonable prices.
Visit antique shops, attics, or estate sales for any deals. The more discerning taste you have about your favorite subject, period, or style of art, the better judgment and assurance you will have when you stumble upon a great deal. Visit galleries that are distant from an artist’s location, and you will find the prices are reduced as well. This does not pertain to nationally or internationally recognized artists.