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Because in the case where the price legitimately rose by that much it would discourage donating the work. Say you bought the painting for $10k, then the artist
by breischl 12y ago
Because in the case where the price legitimately rose by that much it would discourage donating the work.
Say you bought the painting for $10k, then the artist becomes world famous and the price really does rise to $1m. Are you going to donate the painting if doing so would trigger a ~$150k capital gains tax bill? Nope. At least if you sold it you have the proceeds to cover the taxes.
- reitzensteinm 12y agoIf you get tax credits from a donation, which is the situation OP sketched (no pun intended), you should also be hit with the capital gains, and the two would cancel each other out. This is what would happen if you liquidated the asset and donated the cash instead. There should be no difference.
- breischl 12y agoGood point. Now that you point it out, depending on your income tax bracket the credits would probably be worth more than the capital gains tax.