In the October 6 issue of Forbes, columnist Claire Obusan tells the surprising story of Eli Broad:

“Broad should be a lot poorer this year. Worth $7 billion last fall, the insurance and housing maven saw his 46.6 million shares of AIG – received a decade ago when he sold his SunAmerica to the insurance giant for $18 billion – drop 70% between last summer and August 29, the day we priced the Forbes 400 (they’ve fallen much further since). That decline erased $2 billion from his personal balance sheet. But Broad’s net worth fell only $300 million. One reason: the soaring value of his 2,000-piece art collection. Comprising mostly contemporary pieces by artists like Jeff Koons, his collection was recently appraised at $1.9 billion, up 72% in a year.”

The article goes on to detail how several members of the Forbes 400 have hedged their fortunes during these volatile times by buying and selling and investing in art.

Of course, you don’t have to invest millions, or even tens of thousands, to buy contemporary art.  It is readily available, often at a fairly reasonable cost, at your local gallery or art festival.

The Secret to Investing In Art

The secret to investing in art, however, is buying right.  Most of us, myself included, are not experts at buying contemporary pieces of art below fair market value. 

That’s why I often recommend that both novices and experienced art buyers use Mike Kuschmann, President of Fine Arts Limited.

Headquartered in Winter Park, FL, Fine Arts doesn’t have a gallery of artwork to sell.  In fact, it doesn’t have a gallery at all.

Kuschmann is a “buyer’s broker.” That means he works for you, not the seller. If you visit a gallery, art festival or retail store and see a print, painting, sculpture or other piece you’d like to own, don’t pay retail. Mike will contact the seller on your behalf and negotiate a dealer’s price, saving you hundreds or perhaps thousands of dollars.

Mike has also saved his clients quite a bit in taxes, as well…

Investing in Art – Donating to IRS-Approved Charities

The 1995 Tax Act allows you to donate to any IRS-approved charity works of art at their fair market value, not at their cost basis. (Moreover, you can deduct the charitable gift’s fair market value on your return without being subject to the dreaded alternative minimum tax.) 

As Mike explains, “I work closely with published artists and sometimes acquire limited edition prints or serigraphs at a substantial discount to the current market value. Clients of mine purchase them far below their published cost – often for just a few thousand dollars – and later donated them to a local hospital or university at their appraised value, allowing them to save thousands of dollars in federal taxes.”

The IRS requires you to hold these art investments for one year in order to donate them at their fair market value. And, of course, they’re beautiful. You may decide to just keep them. 

However, most of his clients donate them to a local hospital or their old alma mater – and get a tax deduction for the charitable contribution. (Or Mike can handle the donation for you.) 

For more information, feel free to contact Mike Kuschman at 800.229.4322 or 407.702.6638.  He’ll send you a complimentary brochure packet, detailing his services and the tax savings available.

Over the next few weeks, I’ll be highlighting several other year-end tips for reducing your federal tax liabilities. 

At the rate Uncle Sam has been spending money lately, you can bank on taxes going up soon. 

It pays to plan today to keep your taxes low tomorrow. 

Good investing,

Alexander Green
Investment U