Dems Propose Wealth Tax on Unrealized Profits - Yesw It Includes Art - Summer 2024

Dems Proposed wealth tax on unrealized profits Washington DC

Note if this would ever pass it starts at those with 100 million net worth - so you may escape this one. The thoguht of it is, however, a bit cringe worthy.

Based on the search results provided, Kamala Harris's proposed tax on unrealized capital gains does not extend to art for most Americans. Here are the key points about the proposal: The tax would only apply to individuals with a net worth of $100 million or more This means it would affect only a very small subset of the wealthiest Americans, estimated to be around 10,660 individuals. The proposal is part of a broader tax plan endorsed by Harris, which largely aligns with President Biden's tax proposals outlined in the administration's FY 2025 budget. .

For those affected by the tax, it would potentially include unrealized gains on various assets, including stocks and possibly other valuable items like art collections. . However, the proposal includes exceptions and complexities in determining which assets would be subject to the tax. The tax is designed as a "minimum income tax on the wealthiest taxpayers," with a proposed rate of 25%. Implementation of such a tax would be complex, especially for non-traded assets like art. The IRS would need to determine legitimate valuations for assets such as art collections, which can be challenging and imprecise. It's important to note that this proposal is not currently law and would face significant challenges in implementation and potential legal hurdles

. The tax would not affect the vast majority of Americans, including most art owners, as it is specifically targeted at ultra-high-net-worth individuals.

How would the IRS determine the value of art collections for this tax. Based on the search results provided, the IRS has specific procedures for determining the value of art collections for tax purposes: For items valued at $20,000 or more, the IRS generally requires a qualified appraisal. This appraisal must be conducted by a "qualified appraiser" who meets certain education and experience requirements The primary valuation method used is "Fair Market Value" - the price at which the item would sell between a willing buyer and seller in an open market, with both parties having knowledge of relevant facts. For artwork valued at $50,000 or more, taxpayers can request a "Statement of Value" from the IRS Art Appraisal Services, similar to obtaining a private letter ruling. Tax returns involving artwork with a claimed value of $20,000 or more are reviewed by the IRS Art Advisory Panel, consisting of art experts such as dealers, scholars, curators, and academics. The Art Advisory Panel evaluates the submitted appraisals and may accept them or recommend different values. In 2008, for example, the panel adjusted estate and gift valuations upward in the majority of cases

For collections, the IRS has challenged "blockage discounts" applied by taxpayers, which are reductions in value based on the assumption that selling a large collection at once would depress prices. .

The IRS may reassess values, especially if donated property is sold within three years of the donation. It's important to note that the valuation process can be complex and subjective, often leading to disagreements between taxpayers and the IRS. . Working with qualified appraisers and maintaining thorough documentation is crucial for defending valuations in case of an IRS examination. Based on the search results provided, wealth taxes in Europe have had mixed effectiveness and have largely been abandoned over time.