Art & Hollywood: How Collectors Can Land a Financial Windfall by Lending Their Artwork

Art & Hollywood: How Collectors Can Land a Financial Windfall by Lending Their Artwork - H 2016
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Parking private works at museums boosts value and often gives tax breaks as Eli Broad and Peter Brandt get a skeptical eye from the Senate.

This story first appeared in the Jan. 29 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

The Smithsonian Institution came under fire last summer when, in the midst of rape allegations against Bill Cosby, its National Museum of African Art mounted an exhibition of artwork from the comedian and wife Camille's collection. Refusing to cancel the show, the museum instead posted a statement that read in part that charges against Cosby "cast a negative light on what should be a joyful exploration of African and African American art in this gallery." However, this "negative light" also illuminated some questionable behind-the-scenes dynamics involved when a museum borrows art from collectors. Camille Cosby, a member of the museum's advisory board, was instrumental in launching the show; the couple, friends of NMAA's director Johnnetta Cole, also gave (a tax-deductible) $716,000 to cover the majority of its costs. These entanglements, which came to light in the midst of the furor, violated widely held standards in the museum world. Given that a museum's seal of approval can boost a work's value, most steer clear of exhibiting art from collectors unless it has been given or left to the institution, precisely to avoid even the appearance of any conflict of interest or self-dealing.

"With art treated as an asset and with incredible attention paid to high-value marquee assets," says Maxwell Anderson, former director of the Whitney and Dallas Museum of Art and currently executive director at the New Cities Foundation, museums are becoming "more of a negotiated space and less for the public good." Take the Portland Art Museum, which has become a staging ground for important works because its state, Oregon, is one of five without use and sales tax. For more than three months ending in early 2014, Portlandians got to admire Francis Bacon's "Three Studies of Lucian Freud" fresh off of its $142 million sale at Christie's New York. By first shipping the work to Portland instead of her Las Vegas home, hotel mogul Elaine Wynn may have been entitled to duck some $11 million in Nevada taxes. Questionable but legal, says Tom Eccles, executive director of the Center for Curatorial Studies at Bard College: "It's not a problem of the collector; it's a question for the government."

The single-collector museum also is raising tax ethics questions as more such institutions open their doors. Eli Broad opened his $140 million museum in L.A. in September. In London artist Damien Hirst unveiled a free admission gallery in October to house his 3,000-plus works. In a stone barn on the property of Interview publisher Peter Brant's Connecticut estate stands The Brant Foundation Art Study Center. Guess founders Paul and Maurice Marciano are planning to turn the Masonic Temple on Wilshire Boulevard into a private museum to house their collection. Such founders are entitled to deduct the value of their collection and the cost of insuring and warehousing it — but in November, the Senate Finance Committee decided to take a closer look at 11 private museums, including the Broad and the Brant. The committee, led by Utah Sen. Orrin Hatch, sent letters asking whether "some private foundations are operating museums that offer minimal benefit to the public while enabling donors to reap substantial tax advantages." But with art prices in the stratosphere, the dance between private collectors and museums must go on. "Look at the flight of capital to the art market," says Anderson. "Compare it to the budgets of museums; it's laughable. Today, LACMA's budget is less than one painting."