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Art Collectors Under Scrutiny in New York Tax Probe

Art Collectors Under Scrutiny in New York Tax Probe

(Bloomberg) -- Art collectors and art executives are in the cross hairs for tax avoidance.

On Tuesday, real estate developer Aby Rosen and Gagosian Gallery Inc. sales executive Victoria Gelfand’s firms agreed to settle New York state claims that they didn’t pay sales and use taxes on fine art. Rosen, who controls the Seagram Building and Lever House, agreed to pay $7 million and Gelfand’s firms will pay $210,000, New York Attorney General Eric Schneiderman said. The settlements don’t include admissions of wrongdoing.

The accords come as New York state authorities turn their attention to the booming art market, where collectors are suspected of using questionable techniques to avoid taxes.

“There are a number of cases that are not even public that are going on right now,” said Gary Castle, a partner at accounting firm Anchin Block & Anchin in New York, who works with collectors, galleries and art foundations. “We are seeing notices and inquiries about specific transactions. We’ve seen them over the past year.”

Contemporary Art

According to Schneiderman, Rosen bought or commissioned more than $80 million of contemporary art since 2002, claiming the pieces were for resale and not subject to sales taxes. The pieces were actually for personal enjoyment and used to enhance the developer’s properties, Schneiderman said in a press release.

Rosen didn’t immediately respond to a phone request for comment.

“These were purchases through a personal company and had nothing to do with the Gagosian Gallery,” said Jo Backer Laird, a lawyer who represents Gelfand. “The works were fully intended to be resold. In fact, efforts were made to resell them. Victoria settled because of the department’s position that works that are intended for resale but are exhibited in the home of the taxpayer are subject to sales and use tax.”

Gelfand disagrees with Schneiderman’s position, Laird said. The gallery isn’t accused of wrongdoing.

“We are committed to rooting out tax abuses wherever we find them, especially in the art world, where the difference can be hundreds of thousands -- if not millions -- of dollars in lost tax revenue per sale,” Schneiderman said. “When art collectors don’t pay their fair share, law abiding New Yorkers should not be stuck footing the bill.”

To contact the reporters on this story: Rebecca Spalding in New York at [email protected] ;Katya Kazakina in New York at [email protected] To contact the editors responsible for this story: Drew Armstrong at [email protected] David Glovin

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