Did Bob Dylan Sell The Copyrights To His 600 Songs To Avoid A Higher Capital Gains Tax Rate In The Biden Administration?

Jack Bogdanski (Lewis & Clark), It's Alright, Ma (I'm Selling 'Em All):

I read today that Bob Dylan has sold the copyrights to more than 600 of his songs, pretty much all of them, to Universal Music for a reported $300 million. It sounds like a lot of money, but scrolling down in one of the stories, I saw that Stevie Nicks recently got $80 million for hers. Heck, Dylan is not even four times Stevie Nicks? It does not compute. Maybe he sold too cheap.

Anyway, this news causes my alleged mind to turn to a time-honored pastime among tax types: allocating the mega-purchase price among the various songs. The whole catalog is worth the overall price Universal is paying, but how much would you pay for, say, just "All Along the Watchtower"? Tax people have to unbundle packages this way all the time. The packages just aren't usually as cool as this one. ...

Why is he selling now? The income tax hit will be massive. Maybe he's thinking his tax rates are going to go up next year under Biden, and in whatever state he calls home. And maybe he's getting a better tax rate by selling than he would get by continuing to collect annually. But still, he's setting up a nice payday for the IRS if he's cashing in all his chips at once. (Maybe he's getting paid out over a few years, which might allow him to spread the tax hit out a bit over time.)

Geoff Colvin (Fortune), Was Bob Dylan’s Sale of His Massive Music Catalog a Tax Maneuver?:

For a number of reasons, late 2020 may be the absolute optimal moment to sell a top-tier music catalog, and Bob Dylan’s catalog is arguably on a tier of its own near the very top. ...

The deal’s value to Dylan depends on how the proceeds get taxed. A gigantic windfall like his would normally be taxed as a capital gain at a rate of 20% under current law. But President-elect Biden has proposed taxing capital gains as ordinary income for taxpayers with income over $400,000. The top ordinary income rate is now 37%, and Biden has proposed raising it to 39.6%. ...

Such changes rarely happen quickly, but changes to tax law have sometimes been retroactive to the beginning of the year in which they’re enacted. The Skadden Arps Slate Meagher & Flom law firm is warning clients: “The potential elimination of the capital gains rate preference, along with the anticipation of a likely corporate rate increase, could also serve as potential catalysts for taxpayers to close M&A deals this year if they anticipate that these proposals could be enacted in the first year of a Biden presidency, with the possibility of a retroactive effective date of January 1, 2021.”

Bottom line: The tax on a deal like Dylan’s could almost double if it doesn’t get done by New Year’s Eve.

Peter J. Reilly (Forbes), Bob Dylan's Debt To Nashville — It's About Taxes:

When I read in the Wall Street Journal that Bob Dylan had sold his entire songwriting catalog, I immediately wished that I had been in on the tax planning for that. ...

Assuming this is a straight-up cash deal Dylan will get capital gains treatment on the sale. ... You have to wonder whether anticipation of a new administration with a different view of capital gains was a spur to getting this deal done. Tim Ingham reported on a surge in interest in selling right after the election in Rolling Stone. ...

Recognizing an enormous capital gain is not exactly the epitome of great tax planning. So there may be something else going on. It would be really interesting if Dylan kicks the can down the road with some opportunity zone investments.