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I don't know about money laundering but I've heard of a tax fraud trick involving art. Basically, a sketchy businessman buys a bunch of art from some random un
by tomatotomato37 6y ago
I don't know about money laundering but I've heard of a tax fraud trick involving art.
Basically, a sketchy businessman buys a bunch of art from some random unknown artist for pennies. He then gets his art world friends to start praising that artist and thus appraise the art at a stupidly high value. Come tax season, sketchy business man turns philanthropist and donates said art to some random museum. That donation is written off as a tax credit at that stupidly high value and now some museum is left holding crappy art. Alternatives strategies involve using the over-valued art as collateral for a loan or something in case cash is needed instead.
It's sorta like a pump-and-dump, except the intent is to fool some bureaucracy rather than the public.
- tylerhou 6y agoAny evidence that this happens regularly? Often FMV of non liquid assets has to be evaluated by auction.
- vlovich123 6y agoEvaluated by whomever you pay to have it evaluated. Watch dirty money. They explain the malincentives pretty well.
- mynegation 6y agoHow does that work, mathematically? If you bought an asset and it appreciated you are liable for a tax on capital gains. If you donate this asset that simply eliminates the gain and the associated tax. But this is obviously a thing. Where am I wrong?
- ceejayoz 6y agoThe gain is fake. The tax benefit from the donation that is based on that fake gain is not. It’s like making a million dollars in counterfeit money, then donating that to charity. You reduce taxes by $370,000, and are out $0.
- xur17 6y ago> If you bought an asset and it appreciated you are liable for a tax on capital gains. If you donate this asset that simply eliminates the gain and the associated tax. But this is obviously a thing. If you donate an asset it eliminates the gain and the associated tax in addition to giving you a tax deduction in the amount of the donation. This is why people like to donate highly appreciated assets rather than selling the asset and donating the resulting funds.
- deleted 6y ago[deleted]