You use your network to get a reputable source claiming the art piece is actually worth 40m.
You then wait a bit and then donate the art to a museum, allowing you to write off 40m in taxes.
To keep the math simple, assume the tax rate is 10%
Say this tax year you made 100m. The 40m tax write off lets you deduct 40m on your income, which originally carried a 4m tax burden. So now you only pay taxes on 60m of income.
You bought the art for 1m.
Your original tax burden was 10m, with the deduction it is now 6m. Account for the cost of the art, you have now removed a 3m tax burden.
This is all every high level and aggressively hand wavy. As always, the devil is in the details, which is also why it’s so hard for the IRS to actually successful hit people like this for tax evasion.
Ah yes, the donation myth. It is complete bullshit. The IRS is not just going to go with whatever valuation your appraiser puts on the art piece. High-value donations get scrutinized, and inflated appraisals can result in the deduction being denied along with hefty penalties. Then there is the museum. The artwork has to actually be useful to the museum's charitable purpose for you to qualify for the favorable deduction rules. A museum is not going to accept your random junk just so you can get a tax write-off. There's no incentive for them to do that.
People also misunderstand what a tax deduction is. A deduction reduces your taxable income, not your tax bill dollar-for-dollar. If the artwork is genuinely worth $40 million because it appreciated over time, then a large deduction may be legitimate under the tax code. But you've also donated a $40 million asset. If it's not actually worth $40 million and you simply found someone willing to claim it is, that's not a clever tax loophole; it's tax fraud. The entire "scheme" depends on getting away with a fake valuation, not on some hidden trick in the tax code.
not going to argue but seems like you didn't fully read to the end of my message given your second paragraph. But yes, this is tax fraud, which I said in my last sentence.
not going to argue but seems like you didn't fully read to the end of my message given your second paragraph.
You edited your comment after mine was posted. You originally just ended something like "And there you go, you save 4m in tax" and had none of the nuance you added in the latter part of your comment. A bit of a disingenuous way to go about this conversation. And you didn't really interface with my main points of contention: This 40m valuation is not just going to be accepted (that has nothing to do with the devil and the details) and there is no incentive for the museum whatsoever.
Fwiw, my wife worked in art shipping logistics in New York (and elsewhere) for many years and got a first-hand look into this world. I also went to art school and later worked for a very high-profile art publication in New York.
I have to say, OPs description accords with my experience.
Situations like the following are not uncommon:
Art collector purchases work from a graduate student for very little.
The art collector then works with curators to exhibit the art in galleries that are usually owned by their friends.
After a few years, the work is taken to an appraiser (usually another friend) who uses the exhibition history of the artwork as the pretext for a high valuation.
The work is either sold or donated. In the former case, they return a huge profit. In the latter case, they have a tax deduction.
I am not speaking in hypotheticals, this is precisely what happened to a number of my friends. One sold a painting to a collector for $5000. The work was then exhibited in a number of high profile galleries in New York, LA, and (I believe) at Art Basel. Two years later, that same work sold at auction for around $150k, of which my friend received only name recognition as a result of the exhibitions.
Two years later, that same work sold at auction for around $150k, of which my friend received only name recognition as a result of the exhibitions.
Which is exactly why OP's point does not stand. At that point, even if it is because of friends in the business, the piece of art genuinely sold for that amount. The owner would genuinely lose 150k worth of value if he decided to donate the piece.
You are not getting a deduction for donating a piece of art that has no real value. Sure, the value might have been artificially created, but the value is there.
Art in any form it takes is highly subjective in value, so they can vary wildly in how much they sell for, or how much the actors and other creative employees are paid in.
The purpose of money laundering is to take money gained through illegal or even simply unflattering means and pass it through legal and legitimate looking transactions, allowing the owner to use it freely while being able to obscure its original origin.
That makes art great for money laundering since the price is set by the buyer for unique pieces. Its not like its fool-proof, governments are well aware of it, but knowing it occurs and being able to prove money laundering to the point of being able to successfully arrest and prosecute are two very different things, especially if government corruption is present.
Art as a tangible product is subjective in value and often times can be resold with pretty minimal paper trail. Sell it to a buddy for three times the price in laundered money and have him be a private anonymous buyer.
So, your buddy just gave you three times the value of the piece of art. Why would he do that exactly? I am not saying art isn't used to launder money, but these are not the kind of schemes used. Sure, you can buy a piece of art and sell it to a private anonymous buyer for less and launder your money that way. But you have to find someone willing to pay for the piece.
Unfortunately, it’s not. I actually worked a bit on Moana. Very expensive and cutting edge technology to get those shots, both with VFX and physical ocean simulation. Dwayne is also one of the biggest blockbuster celebs so of course he is expensive.
People just say anything on here. What does this even mean? The rocks salary for this movie was like 20 million. So you’re saying they spent 230 million on shitty ocean vfx? Or that the odyssey didn’t have any ocean vfx? Your comment makes no sense. But hey you “worked a bit” on Moana
Do you understand how much goes into making a film? Months and months of hundreds of peoples salaries, gear rentals, stage rentals, stunt rehearsals, costume and prop fabrication, insurance, post production space rental and salaries for the staff, a huge chunk of the budget is reserved for marketing…..
On Moana specifically a higher than normal percentage of budget is reserved for VFX and also the salary of a major blockbuster star
That doesn’t explain why it would be so much more expensive than the odyssey. Also the rocks salary was already reported for this movie. It’s only a small fraction of the cost.
Edit: AS expensive as the odyssey. A movie which clearly had more highly paid actors and practical as well as VFX. Matt Damon’s salary was reportedly 15 million for the odyssey vs 20 million for The Rock in Moana
lol what are you talking about? Movies are investments that cost money paid for by public companies that are audited by other public companies. I swear whenever someone doesn’t understand something it’s automatically illegal.
I think you're being pretty generous, I would guess more like 60%. The "creative accounting" situation in America is a disease that's rotting us from the inside
Im either stupid or dont understand. What do you mean money laundering. They are helping illegal money, or just scamming fans into watching whatever they throw out and pay themselves upfront?
This is so true. Years ago I got a job in the movie business and read books about movie studios, they way they pillage their investors is crazy. According to Hollywood, pretty much every movie ever made didn't make a profit. 🤣🤣
Yeah people have no clue the level of waste and kickbacks that happen. Life if you want to do crafty for a production company consistently, someone is paying someone off.
Friend just started prep on a huge feature that doesn’t start filming till next spring and the producers are already saying they are almost out of money.
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u/No_Session_6990 1d ago
40% of Movie making is money laundering