Are you aware of the tax discrepancies for assets held for more than a year or less than a year?

Many taxpayers are unaware of how greatly their taxes are affected by this timeline, but recent changes to the U.S. tax code could provide you with opportunities that make stark differences in your yearly margins.

Probity Appraisal Group has a range of experts able to take on the challenge of your particular assets and package them in ways that benefit you most. Let us help you further your favorite charitable causes while helping you realize benefits unique to your particular situation in life.

Consider this example of how capital gains tax affects collectible art. An owner bought an early work by an up-and-coming artist for $10,000 a decade ago. The current IRS-defined Fair Market Value has shot up to $60,000. Capital gains rates apply because they have held the art for more than one year. Now, they wish to liquidate that investment. They assumed they would get the best return by selling with an auction house and had never considered donating.

Let’s assume the auction house is able to sell the painting for $40,000, net of selling fees paid by the owner:

Net realized price sold at auction= $40,000

Taxable gain (sales price of $40,000 less original basis of $10,000)=$30,000

28% long-term capital gain rate on collectibles…yes, you read that right…there is a separate long-term capital gain rate on collectibles defined by the IRS here:

https://www.irs.gov/taxtopics/tc409#:~:text=Net%20capital%20gains%20from%20selling...

That results in taxes due of $30,000 x 28%= $8,400

The final realized cash value is $31,600

Let’s assume you donate the painting to charity with an appraised Fair Market Value of $60,000

If you are in the 40% tax bracket for federal and state tax rates that is a net tax reduction of $24,000, 50% bracket $30,000.

Not only is there a difference in tax implications along with an unknown auction realized sales price, but there is also the matter of time to consider. Auctions are planned well in advance, and even if you manage to get your item in the next available sale, you could easily wait six months to a year to see your final check.

The art world is governed by specifics, and your antique assets and fine art should be handled by experts who know the subtle differences that make all the difference in value. The tax world is likewise an arena where expertise is rewarded. At Probity, we have the best of both worlds, where experts in the art and antique field work with our CPA to deliver the best possible tax benefits to your particular portfolio.

You could save a year of frustration and add to your bottom line with the ability to donate and be done. Give us a call today to set up a review and set yourself up for success before January arrives. A ten minute phone call could simplify and synthesize your taxes, bringing you peace of mind along with more prosperity.