Artists Fearful of Closing Their Eyes
Recent conversations among veteran artists reveal a growing sentiment: "It would be better if the government or local authorities established crematoriums for artworks." This is not mere hyperbole; it reflects a structural contradiction where the creations that artists have dedicated their lives to can become burdens after their passing.
For unknown artists, the lack of sales history makes it nearly impossible to assess the market value of their works for inheritance tax purposes, and requests for payment in kind are likely to be rejected for lacking 'academic or artistic value.' They find themselves in a triple bind: no cash to pay the inheritance tax on their artworks, no avenues for tax exemption, and no market to sell their pieces.
Conversely, well-known artists are not necessarily in a better position. Pablo Picasso (1881–1973) left behind over 45,000 pieces in his studio at the time of his death, and artists often accumulate far more unsold works, sketches, and unfinished pieces than those sold in the market.
The issue is that the more famous an artist is, the higher the prices assigned to unsold works in their studio based on their name recognition. For instance, Robert Rauschenberg's 'Canyon' (1959) cannot be sold due to legal restrictions, yet the IRS assigned it a value of $65 million, leading to a five-year dispute over taxes. Similarly, the estate of Robert Indiana (1928–2018) was embroiled in litigation for eight years due to the vast unsold legacy of a famous artist, illustrating that even renowned creators are not exempt from the pitfalls of a large unsold estate.
Ultimately, unknown artists are taxed for having 'never sold,' while famous artists are taxed for unsold works simply because of their fame. Both scenarios turn the artist's studio into a hotbed for inheritance tax burdens after their death. This sentiment can escalate to extreme actions, as seen in 1970 when conceptual artist John Baldessari (1931–2020) sent all of his works to a crematorium in a symbolic act of self-immolation. While Baldessari's case was a personal artistic decision, the self-deprecating remarks of many contemporary artists reflect a defensive outcry against the harshness of the inheritance tax system.
Artworks Must Be Preserved Regardless of Fame
Despite these challenges, posthumous works must be preserved. Art history has repeatedly shown that the recognition of a work's value is not solely determined by its contemporary social or artistic acceptance. The case of Vincent van Gogh (1853–1890), who sold only one painting during his lifetime, underscores the potential for reevaluation of unknown artists as future cultural assets.
The concept of cultural heritage does not inherently depend on fame. Just as the works of unknown potters or anonymous folk artists can be designated as national treasures, the essence of cultural heritage lies in the reassessment and societal consensus that can elevate a work's value posthumously. From a national perspective, allowing posthumous works to be sold cheaply abroad due to tax burdens or forced auctions, or facing increased storage and management costs without the possibility of auction, represents a long-term loss for the country.
Inheritance Tax Systems for Art in Other Countries
In France, even artists who passed away in poverty, having sold only a few paintings, cannot escape the inheritance tax laws governing artworks. The posthumous works left behind are legally considered 'inheritance assets.' Regardless of their struggles during life, the IRS imposes strict inheritance taxes on all completed and unfinished works, as well as sketches.
According to French law, the value of posthumous works is determined through objective market assessments by certified auctioneers or art appraisers. If an artist has sold fewer than ten works during their lifetime, their pieces are likely to be appraised at minimal material costs. Considering the exemptions for direct descendants and spouses, most heirs of unknown artists face minimal or no inheritance tax burdens.
However, if an artist's works are later reassessed and they posthumously achieve recognition, France offers a unique exit strategy through its 'artwork payment in kind' system. This allows heirs without cash to transfer artworks to the state to cover their tax liabilities, a precedent set when Picasso's heirs used his works to pay inheritance taxes, leading to the establishment of the Picasso Museum in Paris.
Italy approaches the issue from the perspective of preserving cultural heritage and maintaining family traditions. Italian law exempts artworks deemed to have 'cultural or historical value' from inheritance tax entirely. Even works by unknown artists can be exempt if recognized as worthy of preservation within Italy's rich artistic context. Additionally, Italy offers generous exemptions for direct descendants and spouses, making its inheritance tax system more favorable for artists and their families.
Germany's approach is practical and stringent, providing substantial exemptions for spouses and children. However, the true tax burden emerges when an artist's posthumous value exceeds these exemptions. Germany allows for up to 100% tax exemptions, but only if the artworks are publicly accessible for at least ten years after inheritance.
In the UK, the inheritance tax system is characterized by a high threshold, allowing heirs of artists with low market recognition to inherit without tax concerns. However, if an artist's works gain value posthumously, the UK imposes a 40% inheritance tax on estates exceeding the threshold. The UK also has a long-standing 'payment in kind' system, allowing heirs to transfer artworks to the state to offset tax liabilities, with added incentives for higher valuations.
In Spain, artworks remain exempt from taxation as long as they are retained by the artist's estate, and significant reductions apply to works registered as historical heritage. The U.S. offers high lifetime exemptions and charitable donation deductions for artworks, allowing heirs to manage tax burdens effectively.
Inheritance Tax System Unchanged for 25 Years Burdens Artists
Concerns about inheritance tax for artists are not solely due to individual system deficiencies but stem from the excessively high rates and low exemption levels in South Korea's inheritance tax framework, which have remained unchanged for over 25 years.
When the law was amended in 1999, the inheritance tax was designed for a 'very small number of ultra-high-net-worth individuals,' yet the rates and exemption thresholds have not changed since. The proportion of taxable estates has surged from 0.5% of total deaths to 6.82%, a thirteenfold increase, while the current tax brackets have remained static since their last revision in December 1999.
The blanket exemption of 500 million won has also remained unchanged since 1999. As asset prices have skyrocketed, the outdated inheritance tax system imposes a heavier burden on heirs of artworks, which are assessed for market value after the artist's death.
The highest inheritance tax rate in South Korea is 50%, which, when combined with additional assessments, can reach nearly 60%, surpassing Japan's 55%. South Korea ranks second in the OECD for inheritance tax revenue as a percentage of GDP, trailing only France.
Although the government has recognized these issues and proposed a tax reform plan in 2024 to lower the top rate to 40% and increase the child exemption to 500 million won, these proposals have not passed the National Assembly, leaving the existing system intact.
Simply raising the exemption amounts will not resolve the issues. Without significant increases like those in the U.S. or Italy, the burdens on artists and collectors will persist. The real relief for visual artists in France and the UK comes from supplementary measures like payment in kind and conditional exemptions.
The conclusion is clear: without reforming the rigid inheritance tax framework that has been frozen for 25 years, there is no way to alleviate the burdens placed on collectors and visual artists who have preserved cultural and artistic legacies. The current crisis in the art community stems from the fact that while asset values have soared, the tax laws have remained stagnant. Unless the government and the National Assembly revisit reform proposals, the reality of posthumous works becoming burdensome due to taxes will continue.
In practice, heirs of unknown or non-mainstream artists face even harsher realities, as their requests for payment in kind are often denied due to claims of lacking 'historical or artistic value.' If an artist leaves behind 1,000 posthumous works, even a valuation of 100,000 won per piece could exceed 1 billion won, leading to a 40% inheritance tax burden of 400 million won just to preserve the artworks.
When the state does not recognize the value, and taxes are imposed, heirs and the art community can only argue for a 'zero tax value.' The law stipulates that inheritance tax is based on the 'fair market price' at the time of the artist's death, but if there are no sales records and requests for payment in kind are denied, it paradoxically proves that the artworks are assets with no market demand.
If tax authorities base their assessments on past transactions, heirs may resort to extreme legal measures like 'limited acceptance' or 'renunciation' to protect their assets. In such cases, the state may force the sale of unsold works, which would likely result in them being auctioned off at a loss, ultimately leading to their disappearance and incurring significant management costs.
Institutionally, heirs may also explore options like trusts or transferring artworks to non-profit foundations to delay tax payments. However, establishing a foundation requires substantial initial funding, making it impractical. Additionally, if artworks are transferred to a foundation, they must be used for specific purposes within three years, or the previously exempted taxes may be reclaimed as gift taxes.
The introduction of a 'pay when sold' inheritance tax exemption system would not be easy, as establishing a foundation and museum within the six-month reporting period is challenging. Moreover, one of the tax exemption conditions is that heirs cannot hold more than 20% of the board, meaning they must relinquish control over the foundation's operations.
Ultimately, the management of posthumous works by visual artists is complicated by outdated tax laws, contradictory evaluation criteria, high barriers to relief measures, and the unique nature of artworks as assets. While these works represent cultural assets, they become cold 'inheritance assets' in the eyes of the state upon the artist's passing.
Therefore, the sentiment of 'it would be better to burn them' is echoed among both known and unknown artists. However, solutions are not entirely absent; discussions have simply been avoided. By simultaneously designing and implementing various measures such as adjusting tax rates, improving evaluation methods, easing the barriers for non-profit organizations, and deferring taxes until the point of sale, these issues could be resolved more easily than expected.
A straightforward and rational approach would be to catalog all posthumous works of visual artists and register them with the tax authorities, estimating the inheritance tax based on current market values. This would allow for annual reporting of sales and the payment of taxes only when individual works are sold, implementing a 'tax at the point of sale' system.
This method could leverage existing administrative frameworks for public interest organizations, minimizing the burden of introducing new systems. It aligns with principles seen in the UK’s conditional exemptions, Germany’s ten-year preservation conditions, Spain’s 95% reductions, and the U.S. approach to installment payments.
Additionally, selecting which artists' works should be subject to inheritance tax could prevent administrative waste. For instance, in music copyright inheritance, recent settlement records are used to assess average income over the last three years, reflecting both future income uncertainty and time value.
Applying similar methods to artworks could mean that only artists with substantial sales records over the past three to five years would be required to report inheritance taxes. If works by artists not subject to tax are sold later, a separate tax rate could be applied.
Furthermore, introducing an estimated cash flow method based on recent transactions would be reasonable. Given the transparency of art transactions, this is entirely feasible. Artists with extensive sales histories can be evaluated more clearly, while unknown artists can use their lack of sales as a basis for lower valuations, preventing arbitrary high assessments like those seen with Rauschenberg's 'Canyon.'
However, unlike music copyrights, artworks are taxed as physical originals, so provisions for additional taxation if actual sales exceed initial estimates should be included. A balanced approach combining these methods would require checks and balances, such as interest or value adjustment mechanisms to ensure fairness with other heirs who pay taxes immediately, and obligations for public display to prevent artworks from being indefinitely stored.
Finally, lowering the barriers for payment in kind and transfers to non-profit organizations would allow for the distribution of both famous and unknown artists' unsold works to local museums or public storage facilities. Ultimately, while posthumous works represent the essence of an artist's spirit, they are merely taxable assets in the eyes of the state. However, as evidenced by France's payment in kind, the UK's conditional exemptions, Germany's ten-year preservation conditions, Italy's cultural heritage exemptions, Spain's reductions, and the U.S.'s installment payments, this gap can be bridged through 'deferred taxation conditioned on preservation and public access.'
Yet, South Korea still maintains one of the highest nominal tax rates globally, and the structure of progressive rates applied to the total estate before distribution creates significant burdens. If immediate reforms to inheritance and gift taxes are challenging, combining existing public interest management systems with copyright inheritance evaluation methods could allow for a 'pay when sold' inheritance tax on artworks, transforming the sentiment of 'it would be better to burn them' into a sense of institutional reassurance for visual artists and collectors. It is perplexing that such critical issues were not addressed when the 'Art Promotion Act' was enacted. It is imperative that the National Assembly urgently considers implementing a 'pay when sold' inheritance tax exemption system for visual artists' artworks.
* This article has been translated by AI.
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