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May 22, 2013 The Tax Lawyer

Breaking Up Is Hard to Do: The Sale of a Charitable Art Donation

Vol. 66, No. 2 - Winter 2013

Emily Lanza


    The June 2009 announcement by Brandeis University’s President that the University intended to sell the entire Rose Art Museum collection triggered an emotional and highly publicized fight to determine the rightful home of 7,000 pieces of art. Responding to the recession and to failed investments, Brandeis University had turned to its art collection, valued at $350 million, in order to support its weakening endowment. However, several past donors to the Rose Art Museum quickly filed a lawsuit to stop the sale. After facing a battle in both the legal and public arenas, Brandeis University eventually agreed to stop plans for the sale.

    Brandeis University’s Rose Art Museum controversy is only one example of donor-donee relations that have deteriorated because of an attempt to “deaccession,” or to remove a piece of art from a collection with the intent to sell or to exchange it. Over the past decade, a pattern has developed concerning deaccessioning: a university attempts to sell its collections and donors vehemently respond to stop the sale, resulting in costly litigation.

    To understand why this trend has developed, one must look at the beginning of the donor-donee relationship: the charitable donation of art. Universities typically acquire their art collections through charitable contributions from donors motivated by the appreciation of art, the financial benefit from the tax deduction, or both. Section 170 of the Code requires the donor to meet certain requirements in order to receive the full tax deduction. The investment of time and effort by the donor corresponds with the donor’s perception of the art donation as a unique piece of cultural patrimony and fosters the expectation that it should forever remain in the possession of that particular donee. Although the donee receives a substantial benefit by receiving the donation itself, section 170 does not require the same level of responsibility or expectations for the donation by the donee. Despite several obstacles, section 170 ultimately permits deaccessioning, which encourages the common perception shared by donee-universities that the art donation is a fungible asset that may be sold to support their broader educational mission. Therefore, the conflict arises when deaccessioning triggers a clash of these different expectations with each party seeking relief in court.

    This Comment argues that the structure and requirements of the charitable contribution deduction reinforce these conflicting expectations for the donation, and therefore support the deaccessioning litigation trend. Part II examines the legislative history, purpose, and technical provisions of the charitable contribution deduction in section 170. Part III examines the Brandeis deaccessioning controversy as a case study to demonstrate this deaccessioning pattern. Part IV analyzes the ambiguities and exceptions in the charitable contribution deduction that have created these problems over deaccessioning between donor and donee. Part V then proposes statutory changes and recommendations for practitioners when advising clients and structuring donations to avoid future conflicts between donors and donees.

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