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Taxed by fund-raisers 

Artists to organizers: They don’t get a write-off.

DONATION: V.L. Cox's painting.
  • DONATION: V.L. Cox's painting.
It’s summer, and event organizers are gearing up for the fall season of those benefit art auctions that seem to fill the fund-raising calendar then and in spring. One of the artists the planners will call on is Kevin Kresse, a Little Rock painter and sculptor. Kresse was asked how much work he gives away every year. A pause. “I’m going through the body,” he said, only half joking. “There’s the Heart Association …” Kresse donates work to virtually every high-profile art auction. Painter V.L. Cox will also be “swamped” with calls from people who want her to donate the fruits of her labor to a good cause. In the spring and fall, “I get a phone call a week, literally,” she said. Another artist she knows claimed to have been pelted with 40 requests one year. What Cox and other artists want the good souls who are trying to raise money for a good cause to know is this: Contrary to a widely held belief, when artists donate work to you, they may not write off the market value of the work from their taxes. They may write off the cost of materials — canvas, paint, stretcher — only. Cox, whose large paintings sell for $1,900 to $2,500 or more, estimates she gave away work worth $10,000 last year to art fund-raisers. “Bottom line is, we want to donate to charity,” she said. But a few people who’ve called her “have been confrontational” when she informs them of tax law, she said, insisting that she’s wrong. And she recently overheard someone at a party talking about “getting a bunch of art” as a way to make “quick money.” Indeed, art auctions as a way to raise money have exploded in the past decade. The Arkansas Repertory Theatre’s Artworks, Centers for Youth and Families’ Splatters, Arkansas Foodbank’s Empty Bowls, Youth Home’s Eggshibition, the Arc of Arkansas (which sells the work of its clients), Dorcas House, Dress for Success, Episcopal Collegiate School, Pulaski Heights Elementary School and other schools … the list goes on. When people buy something for charity, they end up with a product. When artists donate to charity, they lose income. As a percentage of income, Little Rock artist David Bailin said, the value of a single piece of work can be enormous. “Say an artist makes, on a good year, $10,000 and is asked to donate a work,” Bailin said. If the painting is worth $1,000, “that’s one-tenth of his total salary.” Some artists donate work — Bailin and many others do not — to get their names out to the art-buying world. But, Cox said, if they donate too much, people will wait to buy their work at auction instead of from the artist, thinking they’re going to get a deal. (This is not always the case. Work often sells for more than its market price in live auctions. But that’s the point, of course — to raise money.) Contributing to the confusion about tax write-offs is the fact that owners of art do get a tax break when they donate to a non-profit organization. Jackson T. Stephens, for example, can write off the value of the French impressionist paintings he’s promised to give the Arkansas Arts Center. (The IRS requires that work valued at more than $5,000 be professionally appraised.) There are other factors the IRS considers — he has to have owned the art for a while, for example. Sometimes even art institutions are fuzzy on the regulations. The Baum Gallery at the University of Central Arkansas, which is soliciting artists to donate works for the gallery’s fall benefit exhibit and sale “10 by 10,” initially informed artists that their gifts would be tax deductible. The confusion arose because the gallery is a museum. A bill to allow artists to donate literary, musical, visual and literary works has been proposed by Sen. Patrick Leahy, D-Vt., and others but has not passed. The pertinent IRS regulation, to which the Times was guided by Little Rock tax lawyer Byron Eiseman, is 1.170A-4(b)(1), which defines “ordinary income property.” Such property includes “property held by the donor primarily for sale to customers in the ordinary course of his trade or business,” artwork, manuscripts and letters created by the donor, and other items, including certain stocks. (Arkansas tax regulations are the same as federal on this point, an employee at the state Department of Finance and Authority said.) Cox cited a couple of events she enjoys participating in. “Splatters rocks,” she said. “They treat artists like royalty.” The annual “Picassos” fund-raiser for Pulaski Heights Elementary’s art program (unfunded by the state) allows artists to name what percentage of the sale price they’d like to have back. Other groups return a fixed percentage. Cox also appreciates groups that follow up on the gift, by letting her know who bought it and for what. A piece she donated to “Picassos” last spring sold for several thousand dollars, she learned; Cox asked for nothing back.
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