Art is a great investment vehicle that can fetch collectors record-breaking returns with no signs of slowing down. As a result, art collections can have significant financial value and may become a point of contention during divorce proceedings in Massachusetts.
Determining if your art collection is subject to division
In Massachusetts, there are two types of properties during divorce: separate and marital assets. An art collection can be a separate property if you bought it before your wedding or inherited it from someone else. Separate properties are not subject to division in a divorce, meaning that the spouse who owned it before marriage can keep the art collection after the divorce.
On the other hand, if you acquired your art collection during your marriage and used marital money to purchase it, then the court will regard it as marital property, subject to division. There are also unique circumstances where the court can treat a separate property as marital. For instance, if your spouse did anything to raise the value of the art collection or if you bought art with your separate money but used marital funds for its maintenance or display.
Valuing and dividing art collection
During the divorce, the court will appoint an appraiser to determine the actual value of the art collection. The appraiser will assess the age, condition and quality of each piece as well as its market value. The judge will then determine what portion of your art collection is subject to division, using factors such as the financial resources of both parties, any contribution made by either party towards acquiring or improving the works and the liquidity of the art collection.
If you agree to divide your art collection in the divorce, it’s important to account for tax implications. The IRS usually considers any gain on the sale of a piece of art as taxable income. In Massachusetts, selling artwork from a private collection isn’t subject to sales tax if it was not purchased as part of a business transaction or resold within 12 months. However, this law doesn’t apply when trading artwork between divorcing spouses splitting up property during divorce proceedings. In this case, taxes may be due on the difference between your art’s purchase price and sale price.