TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 29, 2004

More on Kerry's 2003 Tax Return

Friday, April 30, 2004

Even Sen. Kerry's hometown newspaper is questioning his 175k capital gain from the sale of his 1/4 interest in a famous Dutch masterpiece, Adam Willaerts's "The Arrival of Frederick and Elizabeth, Prince and Princess of the Palatinate, at Flushing, 29th April 1613." The Boston Globe asks, "Is selling 17th-century artwork for profit perhaps too . . . aristocratic for the friend-of-the-people image our junior senator would like to project?" For an in-depth analysis of the tax issues raised by the Boston Globe story, see here. For prior TaxProf Blog coverage of Sen. Kerry's tax return, see here, here, here, here. here, here, and here.

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What I find the most interesting about the Boston Globe article is the fact that apparently the Kerry's got their million dollar investment back from Tillou 'over time', which likely means in years prior to 2003.

That appears to me to be an installment sale of their half back to Tillou, which would have required them to recognize the part of the gains in earlier years when they were recieving payments.

Posted by: Kory Schimke | Apr 30, 2004 7:13:59 AM

Since the Kerry's received their 1 mil before the sale, I would believe that title to the art work passed to him. I would further agrue that when Tillou shared the $700k profit, it was either a gift, which he should have paid the gift tax, or the Kerry's should have reported the $700K as ordinary income in the year it was received.

Posted by: Jim Allan | May 2, 2004 10:09:26 AM

I think the only way that the Kerrys could legitimately recover their full $1 million basis against the first $1 million received, and yet report the additional $700,000 as capital gain rather than ordinary income (under, e.g. Jim's gift theory), would be if either (i) the Kerrys used some kind of open transaction argument or (ii) the investors had really formed a partnership and the $1 million was treated as a distribution by the partnership to the Kerrys as opposed to a partial sale of their partnership interests. I think argument (i) is a clear loser but others may differ. Argument (ii) is totally inconsistent with the form reported by Kerry.

Posted by: C Smith | May 2, 2004 12:48:39 PM