It can be a challenge to think broadly about how to leverage your wealth for philanthropic purposes. Writing a check or transferring appreciated stock is often the default choice for donors. After all, cash and securities are easy to value, simple to transfer, and easy for charities to accept.
In a recent trend, many donors are beginning to think more holistically about their wealth by leveraging certain assets—including art—for philanthropy.
North Texas Community Foundation can be a resource for individuals looking to convert art into dollars that can be used for other charitable purposes. Specifically, we can help by receiving contributions of art that can be sold and used to fund a donor advised fund, designated fund or other charitable giving vehicles.
A passion asset…but for whom?
Art is commonly referred to as a “passion asset.” Yes, art and collectibles can have tremendous monetary value. Unlike other assets, it is common for an owner of a painting or a sculpture to have an emotional connection to the art, too. The art may be a treasured family heirloom or a piece that was purchased because the art captured the buyer’s imagination.
But not all art owners feel the passion and connection.
Suppose you inherited a painting from your grandmother several years ago and, aside from appreciating the gesture, you feel no emotional connection to the art. It is even possible that the art is contrary to your entire aesthetic.
What should you do?
You could sell it, but then have to deal with a capital gain rate of 15%. Or, you could find a way to use the art to further your true passion: philanthropy.
You can, and perhaps should, consider your art holdings as a way to further your philanthropic interests, including charitable gifts of art that can fund a donor advised fund.
Gifting Art to North Texas Community Foundation
It is possible to gift art or collectibles to North Texas Community Foundation for the purpose of funding a donor advised fund. As with other illiquid assets, gifts of art are considered on a case-by-case basis. In determining whether or not to accept a gift of art, North Texas Community Foundation considers the condition and marketability of the art, the authenticity of the piece, the ability to take clean title to the art, storage and maintenance needs and other factors that may turn on the nature of the art.
A Case Study
Sylvia purchased a painting from an up-and-coming artist thirty years ago for $5,000. Over time, the artist has grown in prominence and fame. As a result, her art is now selling at a premium.
Sylvia recently had the painting appraised and discovered the estimated value is now $250,000. She considered selling the art, but she would like to avoid the 15% tax on the capital gain from the sale of art.
Sylvia contacted two local museums to see if they might have an interest in receiving the art as a gift. Both museums expressed interest, but during further conversation, Sylvia learned that both museums would plan to store the work until such time that the art aligned with an exhibition and would be suited for display. Sylvia preferred to have the art in the hands of a person or organization that would treasure the work as much as she does.
Sylvia mentioned her quandary to her estate planning attorney, who recommended that she speak with North Texas Community Foundation about potentially donating the work to NTxCF to fund her existing donor advised fund. Sylvia learned that she could donate the painting, the art could be sold without the Foundation recognizing the capital gain, and the proceeds could be added to her donor advised fund.
Sylvia was not deterred by the fact that her tax deduction for the contribution would be limited to $5,000, as she makes gifts of cash and stock to organizations already that allow her to claim a deduction on her federal income taxes.
Sylvia was thrilled by the idea of the Community Foundation being able to sell the art at auction to a collector who would value the work as much as she did, and that the proceeds would be available for Sylvia to grant to education and social service agencies in the community.
Let us help
Understanding the rules around making charitable gifts of art is just one part of the equation. It is equally important to understand our donor’s motivations and goals, and then explore solutions that make those goals a reality. Gifting art should include a robust conversation about your ultimate charitable goals. North Texas Community Foundation is here to help.
For more information, please contact connect@northtexascf.org or 817.877.0702.
