Fractional Giving of Art Threatened by New Rules Fractional giving allows people to donate a painting, or other work of art, a little bit at a time, providing a tax benefit over many years. But new rules are putting limits on the practice. Museums say it could have a chilling effect on art donations.
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Fractional Giving of Art Threatened by New Rules

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Fractional Giving of Art Threatened by New Rules

Fractional Giving of Art Threatened by New Rules

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Yet another change in the laws infuriating some donors of art work. Under the Fractional Giving Rule, wealthy art collectors used to be able to give away a painting a fraction at a time, spreading out lucrative tax deductions over many years. But new limits on the tax benefits have art museums worried they will receive fewer masterpieces. NPR's David Schaper reports.

DAVID SCHAPER: Even among the thousands of precious works of art on display at the Art Institute of Chicago, this room is special.

Mr. JIM CUNO (Art Institute of Chicago): We're now in a gallery devoted to the works of Monet.

SCHAPER: President and Director Jim Cuno shows off one painting in particular.

Mr. CUNO: There's a very beautiful picture by Claude Monet dating from the 1890s, representing two grain stacks in a field at sunset.

SCHAPER: Cuno says this painting was donated fractionally. That is, the donor handed over the painting in 1985, but on paper donated it a little bit at a time. First 10 percent, then a little more than a little more over 21 years. It allowed the donor to take income tax deductions for the percentage of the painting he donated each year, while the museum got a special work of art that completes a series of six paintings that can be viewed side-by-side as Cuno says Monet himself intended.

Mr. CUNO: They were to be an entire ensemble of similar and related pictures that gave us almost a musical sense of progression of scale and nuance of color.

SCHAPER: Without the fractional gift?

Mr. CUNO: It would be like an unfinished symphony.

SCHAPER: Fractional giving has been popular among wealthy art collectors. They could spread out tax deductions over many years and could capitalize on the artwork's appreciation. If its value went up over the time they were donating it, so did the value of their deduction.

The law required museums to possess the artwork only for the period of time equal to the percentage it owned. If someone donated 25 percent of a Monet, the museum was supposed to get it for 25 percent or three months out of the year. But because of the trouble in cost of moving the piece back and forth, some museums waived that requirement, allowing the donor to keep the artwork at home. And that rubbed some people the wrong way.

Senator CHARLES GRASSLEY (Republican, Iowa): In Iowa, where I live, it's pretty simple. Giving is not keeping.

SCHAPER: Republican Senator and outgoing Finance Committee chairman Charles Grassley.

Sen. GRASSLEY: For instance, you couldn't give away 20 percent of your car to charity and still keep driving your car. So the feeling is that if you're going to give something to the art museum, then giving means not keeping.

SCHAPER: So Grassley pushed through his committee, with bipartisan support, some changes. Fractional gifts now must be completed within ten years. Museums are expected to take possession of the work, and donors can't benefit from any appreciation. Grassley calls them reasonable limits, but art collector Sandy Vesser(ph) disagrees.

When the law changed, Vesser was about to donate a collection of tribal and folk art, worth $2 million, to a Santa Fe, New Mexico museum.

Mr. SANDY VESSER (Art Collector): I have reconsidered that gift.

SCHAPER: Vesser says he's been giving away his art for more than 30 years. This would've been the first time he did it fractionally because he says now that he's retired and has less income, he wanted to spread out the tax deductions as long as possible. Now Vesser says he'll only donate part of the collection.

Mr. VESSER: The public is the ultimate loser, because they go to museums to be entertained and educated. There are going to be fewer items there to entertain and educate.

SCHAPER: Vesser and other art collectors, along with the Association of Art Museum Directors, are urging Congress when it meets in January to reconsider the new tax rules on fractional giving.

David Schaper, NPR News, Chicago.

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