Virginia is an equitable distribution state. Unlike practical assets like real estate or vehicles, however, artwork can be a tricky topic in divorce proceedings. According to the Seattle Times, for some people, it is all about the monetary value while for others it is about sentiment. This was evident in the divorce proceedings of one couple who held an art collection of 43 paintings. The husband wanted a collection he could hang on his wall while holding a net value that would help him in financial dealings.
The wife, on the other hand, connected on an emotional level to some of the pieces, voicing that one reminded her of her family’s ancestry while another caused her to feel calm. This complicates the valuation process in a divorce. For example, one spouse might be emotionally drawn to the scenery of a piece from a lesser-known artist, yet still demand an equal financial share of the collection.
Another problem that may arise is the existence of foreign laws if the art piece is in another country. In the case above, one of the paintings held a historical value for the country it was in, and as such, the country was demanding that the couple get an export license before it could be moved. Couples can decide to simply auction off an art collection and then split the earnings, but this can also be problematic. It usually only works when both parties are emotionally detached from their art collection. Additionally, there are also economic concerns that arise when famous collections are put on the market.
Ultimately, selling off a collection comes at a high price, according to the Internal Revenue Service. Any proceeds from the sale of artwork or other collectibles are considered a capital gain. If a couple decides to sell off a collection during a divorce, they would be subject to a 28 percent federal tax on the earnings. This is not including any related auction or dealer fees.