Fine Art: the world’s most secret tax scam

How fine art is used to evade taxes, and how the fine art market is a scam. In this video, I'm uncovering one of the least well known things in the global tax evasion scene: how fine art is used by people to evade taxes.

You might think that whenever you hear of some painting selling for a ridiculous amount of money, that it's just a collector wanting to buy something nice for their wall. And yes, sometimes it is... but sometimes, it's an elaborate scheme used to dodge taxes in a big way.

Fine art has been used for a long time to manipulate the way the ultra-rich pay tax, hide their money, as well as even launder cash. And hopefully, I'm going to reveal a little of that to you in this video.

I'd love to hear your thoughts below!

0:00 - One of the most manipulated industries on Earth
0:31 - A quick disclaimer
1:27 - How art is used to evade taxes
2:02 - Find yourself an artist
2:43 - Promote the artist
3:58 - Skillshare insert
4:58 - Appraising your new art
5:57 - Donate your art for a tax break
7:03 - The big club of the art world
8:37 - How freeports are used to evade tax
10:26 - Final thoughts

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Sorelle and Leon.
Founders, Abundantia

*We may earn a commission if you buy any products or services via the links in this video's description. This video is not investment, financial, or legal advice. It may be incorrect, outdated, inaccurate, or reflect personal opinions. This video is for entertainment purposes only.

This video was sponsored by Skillshare.

#FineArt #Taxes #ArtEconomics

[ozne_]

Excellent video. One thing is missing from this : not only these people get to save heaps on their taxes, but, unlike other tax evaders, they also get to pass as philanthropists in the media.

[kalilavalezina]

I went to art college and always felt they didn't at all prepare us for the art world. There wasn't even one lecture on connecting to galleries. Now I wonder if they just didn't want to tell us that this is part of the deal of being involved in this industry: shady insider deals and tax scams. Oh and by the way, your art might just end up in a warehouse if you make it big.

[Motoboo_Marine]

As someone who used to do taxes, this makes so much sense. I also agree that it's super unethical and am in no way saying this is a good thing, but they basically came up with a way to essentially donate millions to charity without actually spending that amount. It also explains why a lot of "modern" art goes for such stupidly high prices; I had always wondered the reason for that.

[timon]

As a practicing artist myself, for whoever watching it, I can give some inside view. One of the big no no for fresh artists are not increase the price of your art too fast because price your art ideally should never go down but up. So when situation in video mentioned happened, the gallery and collector basically try to squeeze as much juice as they can from the artist until the price of artist work no longer get higher and no longer can sell.Both of parties get profit from the work and they will just abandon the artist. Since your art can’t get low but high, you basically stuck in this situation that no one will buy your work because of high price and there’s nothing you can do.

[SorelleAmore]

This is actually pretty insane. I never knew...until I made the video about it.

[cmwHisArtist]

As an artist, I was walking out of the Lyme Art Association last week after dropping off a few pieces for jurying. As I gazed at the hundreds of gorgeous works sitting there, done by local, mostly unknown artists, I was blown away by the vision and talent just in our small area of the world. Tears came to my eyes because of the wonder of man’s giftedness, and the limited access to the beauty that is produced. We used to know that in order for a human to develop successfully, he must be able to function with both sides of his brain. The right side, creativity, has been systematically allowed to atrophy for the last 80 years, by first taking art and music out of the schools, which actually are an important form of recreation for the human and gives him appreciation for personal accomplishments. Children are discouraged from the arts by parents who pronounce “there is no money in it”. BUT the hobby should be maintained, as most people end up in a job that does not fulfill on many levels. Even our architecture has become square mostly boring boxes compared to the large ornate structures from hundreds of years ago.
We spend our time watching other people being “creative “ on tv. Our halls and buildings should be covered inside and out in beauty. Our children should be encouraged to express themselves and have joy and spread it to others. Art and music are food for the soul, whether we are able to make it or appreciate it.

[deb.e.]

As much as I love art, this just re-affirms my hate for the art world. There are always people who can corrupt the beautiful things of the world.

[madeconomist]

In the US (I can't speak about other countries) a tax deduction does not work quite like she seems to describe at 6:50 in the video. What she is describing seems to be a tax credit. In her example, the deduction reduces the taxable income by the $9 million she mentions, not the tax liability, which is the amount owed. Since the top federal income tax rate in the US is currently 37%, the savings on federal taxes would be more in the range of $3 million. A caveat here is that some states have high income taxes as well. In California, it's about 12%. So a person living in Los Angeles might be facing a total tax rate of 49% and the tax saving would be about $4.5 million.

[yurrintinckelsonn]

I worked for a woman who ran an art magazine. She found artists, bought their work then promoted the hell out of them. The art goes up. Donate inflated shit to charity and write it off. Rinse and repeat. However much she said it was worth was 100 % her call. Literally printing money by decree.

[robertpaulsin]

I'm not sure this works the way you're saying it does.

In order to book a 10m loss, you'd need to increase the book value of the asset to 10m, therefore having a capital gain you'd have to carry. Without the cap gain, you'd only be able to write off the 250k.

So essentially, you'd be spending 250k to receive a write-off of 250k.

Also, your deductible donations are limited to a % of your gross income. I can't remember what the limits are though.

[haroldcruz]

I am both impressed and appalled on how creative they are in scamming us.

[garydinowitz]

As an art appraiser I can tell you that a major thing you are missing is that the irs audits any donation over 50, 000 and a group of three experts are on this panel. The irs is well aware of these schemes and appraisers do net get paid six figures to appraise a painting and there is also no such thing as a certified appraiser

[BuffaloRangers]

I work in this industry, low level.. this explains so many weird things I’ve encountered! Similar things are done in High end real estate to launder lol

[TheVagolfer]

Sorelle, you are a work of art yourself, and you are also priceless.

[Solarman]

As an artist who lost the use of my right arm from overwork doing 400+ mostly sizable detailed fine art pieces in my life, with 4 solo exhibitions at our Central Bank etc. I always knew of the fraud in art prices, yet it's nice to hear this 'how it's done' description.

[marcusbillings]

This goes even deeper. The ENTIRE world of fine art is predicated on one individual or institution reinforcing an opinion of another in a reinforcing loop. As to witch artists are successful and who are, usually based on who you know and who you blow, to use the vernacular. It's an entirely fictitious world created out of whole cloth, and the quality of the art is never a factor.

[adamlennon]

Excellent, thank you.
I listened to an interview with an art critic about 10 years ago. The host of the show asked " What makes one artist great and another one not" The critic who was as smug as they come, responded "Hot air"

[nalvarado]

This has been around forever. I remember when Van Gogh's Irises sold at auction for about 50 million to a billionaire in the late 80's. This was over 30 years ago and set a record for a Southbeys auction sale. Alot of the details in the deal were hidden and turns out he actually didn't have the money, was lent about 27 million by Southbys, and eventually the painting winds up in the J Paul Getty museum. One of the most important paintings of the post impressionist period stamped with the "None of the publics business" heading. Art world in a nutshell.
I graduated with an art degree and had discussed some of the bizzare exhibits at the Chicago art Institute with friends. I told them they were there as tax write offs for rich people. While people stood in front of a giant black canvas for an excruciating amount of time trying to connect with the artist the gallery waited patiently for the day they could pull the garbage off their walls after satisfying the donors requirements. At the time it was mostly known artists who could convincingly be justifiably overvalued by the museum appraisers. A one million painting being valued at 15 million. My friends were incredulous. The entire concept too far fetched. Yet, there are the perplexing exhibits, the stores of paintings in the museums basements that will never be seen, and the otherwise self centered selfish uber rich falling overthemselves to donate priceless works to museums who just don't have the wall space to exhibit them. You bet. Has to be something else.

[soheilghafurian]

Please more on this topic! It has always intrigued me. What makes it a perfect scam is the beautiful shroud it is wrapped in. You are supposed to love art and pretend you appreciate it, otherwise you’ll be accused of not having either a heart or a brain. Few people have the self-confidence so profess they just don’t get why a certain piece is a big deal. If they did, this wouldn’t have been as easy of a scam.

[bfowler]

Geez……I’m just amazed at how well Sorelle is able to grab your attention and keep you engaged, and simplifying the message. No question that she’s an attractive woman, but she’s charming and communicates in such a way that there doesn’t seem to be a trace of a negative attitude (jealousy, judgment, etc.), although she is still able to call dishonesty what it is, but with total objectivity. Fun to watch and learn….definitely must subscribe!