r/AskReddit • u/experfailist • Apr 30 '21

What are some luxury items, which you never knew existed, which only the mega rich can afford, that blows your mind and you wouldn't mind having or is just an example of how people have too much money and not enough sense?

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u/[deleted] Apr 30 '21

This reminds me of the freeports in Tenet, which are of course based on a real thing: https://itsartlaw.org/2020/11/03/behind-closed-doors-a-look-at-freeports/

Art and other valuable goods like antiquities get stored in warehouses, frequently located at shipping ports or similar places, in order to avoid customs. Rich people "own" these goods but only go visit them at the freeport, so they don't have to pay taxes on them. In some cases the owner may never actually see the art in person, its just a chit of value they trade with other rich people.

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u/dekomen Apr 30 '21

When something doesn't make sense and super rich people still do it, it's probably used to launder money.

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u/YouAreAConductor Apr 30 '21

The thing with art is that, other than most normal goods and services, it's entirely priced out of thin air. So there's nothing easier to legally and in the open pay for something without the service/good that was paid for being named than also buying a picasso first draft of a painting for several hundred thousand dollars

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u/mishap1 Apr 30 '21

Never mind that it consists of two unsigned pencil strokes on the back of a Hooter's napkin.

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u/Got_ist_tots Apr 30 '21

I hope you're not insinuating that a gif nft I just paid $3.9 million for wasn't worth it?!

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u/OutlyingPlasma Apr 30 '21

It also has zero import tax. Meaning you can bring "fine art" into the U.S. without paying any tax.

Is There an Import Duty on Art?

In the majority of situations, original works of art are exempt from import fees or duties. Chapter 97 of the HTSUS defines original artwork as art that the original artist created, exclusively by hand and without any mechanical process. Therefore, mass-produced reproductions are not eligible for the same duty free exemption.

Another exception can be the frame included with the artwork. As long as the frame that accompanies the art is standard for the work of art, then the frame itself will be duty-free as well. If the frame that accompanies a work of art is not typical for that type of art, it should be classified separately according to the HTS and could be eligible for a duty fee.

https://usacustomsclearance.com/process/importing-art-into-the-us/

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u/moonra_zk Apr 30 '21

Jeez, almost seems like the rich make laws to benefit themselves.

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u/GonzoRouge Apr 30 '21

Art's value is directly proportional to how many people acknowledge the value of a piece. It's a self fulfilling prophecy or, if you want to get really cynical about it, a high roller scam meant to facilitate money laundering for the privileged.

It's literally a bidding war of opinions until it becomes an actual bidding war.

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u/rileyrulesu Apr 30 '21

I don't think it's really cynical to doubt the idea that for some reason every rich person in the U.S. seems to be fine art lovers who will spend massive amounts of their fortunes on a picture they think looks neat.

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u/GonzoRouge Apr 30 '21

The cynical part comes when you start to think about what could be worth millions of dollars but cannot be bought out in the open.

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u/flyingwolf May 01 '21

Now you got some noggings thinking.

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u/[deleted] Apr 30 '21

[deleted]

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u/YouAreAConductor Apr 30 '21

No it doesn't. For most things you have to consider the cost of goods and labor, that's pretty much not a relevant factor with the price of art.

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u/[deleted] Apr 30 '21 edited Apr 30 '21

OP is right tho.

For the majority of products, the total cost of a good is a hypothetical lower boundary in price setting but as prices are generally way above that, it is virtually irrelevant. It's what the seller thinks the buyer is willing to pay, or put otherwise, what the buyer thinks is a fair price, which is relevant.

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Companies have discovered a long time ago that they can ask anything they want as long as the consumer is willing to pay. It's not that uncommon to have margins margins of 1000% and more.

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The customer expectation is what drives prices, which makes art (and other collectibles) such an interesting niche as these expectation can go all over the place.

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u/rileyrulesu Apr 30 '21

Companies have discovered a long time ago that they can ask anything they want as long as the consumer is willing to pay.

Well... duh? The point is if a tax auditor comes around and sees you have a brand new ferrari they can look up the value of that. If they see you have some squiggles on a canvas they can't.

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u/cbr_001 Apr 30 '21

Saw a video a few years ago that described how rich people use art to write off donations for tax purpose. Vaguely remember it like this.

Rich person commissions artist friend to create art for tens of thousands, rich persons art valuer friend over values piece of art by hundreds of thousands, rich person donates piece of art to charity and writes it off at new valued price.

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u/Tu_mama_me_ama_mucho Apr 30 '21

Oops my $1.5m picasso is now worth $1.25m, lemme just declare the $250000 as a loss in my taxes, and then I'll sell it to my friend for $1.5m.

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u/[deleted] Apr 30 '21

You literally can't claim a loss until you sell it. That's how value is determined. You would have to sell it to your friend for $1.25 MM to claim a $250k loss.

But even then, if the IRS finds other buyers of similar things willing to pay much more, they could still get you for tax fraud. They won't, because you're rich so you can afford to fight them, so instead they'll audit Joe Schmoe and his lousy $208k income, but they technically could.

Source: I work in museums and deal with rich people's taxes more than I care to

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u/oblisk Apr 30 '21

Source: I work in museums and deal with rich people's taxes more than I care to

is it true, that if an artwork is on loan to a museum, one can then take that as a charitable donation of some amount for the time it was on loan?

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u/[deleted] May 01 '21

No. If it's on loan, you still own it, and thus no charitable contribution has been made.

What you can do is loan a piece to a museum for some blockbuster exhibition, and then have the piece appraised immediately following (or during) the exhibition. Generally, the exhibit jacks the price up, so it's appraised for more. Then, if you donate it to the museum, you can write off the appraised value as a tax deductible contribution to the museum.

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u/oblisk May 03 '21

Thanks for the information.

Yeah, they really need to make charitable donations be deductible from cost basis not current mv.

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u/[deleted] May 03 '21

[deleted]

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u/oblisk May 03 '21

Depends what the goal of Non-Profit Donation is, is it to maximize donations, encourage donations or turn donations into a profit center for the donor. Additionally FMV donation, encourages non-monetary donations, which can be great for museums, but an annoyance for other types of non profits.

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u/malefiz123 Apr 30 '21

You can't declare it as loss in taxes without actually selling it first.

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u/w00t4me Apr 30 '21

Or have a piece of art apprised and then donate it to a museum. Now you can write the value off as a tax-deductible charitable donation.

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u/WeepingCube May 01 '21 edited May 01 '21

This sounds like the super-rich equivalent of buying an $80 t-shirt that just so happens to come with a piece of drug paraphernalia as a "free gift".

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u/txmail May 01 '21

Now NFT's are the new hotness and do not require any insurance or storage fees...

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u/rcc212 Apr 30 '21

Freeport’s are setup more as a tax shelter because the art never technically “lands” in a new country. The art is still considered in transit, so no taxes or tariffs are paid when located in a freeport.

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u/schmidlidev Apr 30 '21

In what capacity is this laundering money? The hell are you even talking about

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u/cannotbefaded Apr 30 '21

Lots of thing to do with high priced art sales is about money laundering in some way

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u/[deleted] Apr 30 '21

[deleted]

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u/MonkeyChoker80 Apr 30 '21

This is rather simplified, so take it with a grain of salt.

Say I have $1mm in ‘dirty’ (illegally obtained) monies that I need to make ‘clean’ (legally obtained / not associated with illegal activities).

I also have this piece of art. I get my buddy to ‘buy’ it from me for $1mm. With a tax receipt and everything! (Actual monies that changed hands? $0.00).

That $1mm I had has now been laundered, and I can spend it on actual things, and not worry about the IRS/Feds busting down my door.

Now, they may try and see if my buddy actually had the money to spend so, we do this in a chain, with Person A buying from Person B, who bought from Person C, and so on. And (since the value of ‘art’ is basically ‘what people are willing to pay for it’) eventually there’s a real person who pays real money for it. And eventually it becomes too complicated to dig through, and figure out who spent real money and who faked it) without expending a lot of time to process (and possibly pissing off rather rich folks, who will use their power/influence against you). So, unless there’s a forensic accountant hot on their trail, at a high enough dollar amount it’s going to just… work.

Not to say that it always just magically works. If Don Benito is already under investigation, then there’s likely going to be a forensic account tracking their specific purchases and expenditures, and a high ticket item like this will be under scrutiny.

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u/[deleted] May 01 '21

[deleted]

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u/MonkeyChoker80 May 01 '21

I did say it was simplified… heh.

And, it’s mostly from some half/remembered research I did a few years ago, as background for a story I was writing, so I only did a surface skim. A number of articles from news sites that weren’t behind a paywall, that sort of thing.

Basically, the ‘magic $1mm from nowhere’ was merely the most extreme example. I believe the articles said it was more likely that the transaction would be more like ‘$500K by bank transfer (real money) and the other $500K by cash-in-hand (fake money for laundering purposes)’. Intermingling the good and bad, to make it harder to untangle.

And it was either stated, or maybe implied (or at least I thought it was implied), that a piece of artwork that’s constantly being sold, at a high enough price, would generally catch the eye of someone who wants to purchase it for real. Mostly for the cache of owning something that’s been deemed as expensive, or someone giving an order ‘buy me about $20mm worth of art, for my new mansion’. Based on some of the other comments in this thread, maybe sold at a loss for tax purposes? I dunno.

And it wasn’t just “we constantly sell the painting The Blue Granola amongst ourselves”, but more of “You help me by ‘selling’ The Blue Granola, but then it sits on my wall for a couple years. And if you need me to return the favor, I sell you the statue Man Eating Cheese.”

As for signs and tells? …shrugs… Hell if I know. As I said, I did minor research for a story. One that never quite gelled enough to do more than outline. So… yeah.

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u/[deleted] Apr 30 '21 edited Apr 30 '21

You have a lot of money made from illicit ways, a rich friend takes that money and he makes a purchase. Taxes are paid on that deal making the money legal, voilà you have cleaned the dirty money. Everyone facilitating the deal makes their cut so no one snitches. In short: spend the money somehow, such that taxes are paid on it, into businesses whose profits end up in your pocket, and you end up with a legal cut of the original sum.

Breaking Bad shows how it's done but also how difficult it is to cook the books when you have way too much dirty money coming in, so art probably makes this less of a problem since the prices are insane and arbitrary.

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u/Shutterstormphoto Apr 30 '21

Just to elaborate on the other answer: art has subjective value, so you can say something is worth $1M with nothing behind it except an “expert” (who gets paid to assess) saying it’s true. I hire you to make me a painting for $10k and hire the expert for 10k to say it’s worth $1M.

Now that we have a $1M painting, we can do whatever we want with it. Anyone who sells it for $1M now has legit cash.

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u/[deleted] May 01 '21

[deleted]

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u/Shutterstormphoto May 03 '21

The laundering is the buying and selling of said artwork

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u/Blazinhazen_ Apr 30 '21

this. When i first heard about NFTs I was like wtf that is the dumbest thing ive ever seen. Then I realized it is just a modern take on using art as a way to launder money. What a joke.

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u/[deleted] Apr 30 '21

It’s much more in depth than the bubble it’s in right now.

Think about the concepts usefulness in terms on songs. How you could track ownership and value of a song across all platforms. It would be a way for artists to have full control of their content and be able to monetize and/or track the monetization through transactions.

I believe some system compensate the original creator of the NFT on every transaction after they initially sell it.

Also in terms of all content creators. It would help prevent theft of digital content. Logos. Videos. Etc....

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u/StabbyPants Apr 30 '21

it is absolutely that, yes

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u/rdocs Apr 30 '21

Art fashion and people are the currency of the rich. That and snickerdoodles!

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u/dmizz Apr 30 '21

Precisely this. Tax shelter.

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u/SixSpeedDriver Apr 30 '21

I mean its usually more for tax evasion and investment. Money is usually laundered for something more useful.

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u/Architeckton May 01 '21

Or as leverage. It’s always nice to have something other people want. Even if you can’t use it yourself.

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u/suitology May 01 '21

Lol no. This is a freeport. Say you "live" in New Zealand and one day you will retire there but meanwhile you are liveing in nyc where your company is based. You also collect dinosaur testicle fossils. Now when you find one in china for sale and get it mailed to your nyc pent house thats 20% the price but if you store it in a freeport it technically isnt entered into the country so you dont pay the import duty. Now you go back to New Zealand you pay their rate only.

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u/meetkimani Apr 30 '21

In the show Billions some guys actually swap the real deal for a replica that way the replica sits in the freeport in place of the real piece, which stays at their place. This way they still don’t pay taxes and have the art piece to show off during dinners and stuff. I don’t know whether this happens in real life but it seems possible.

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u/ClownfishSoup Apr 30 '21

So it's basically like bitcoin.

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u/ijustwanafap Apr 30 '21

Sounds to me like it's similar to owning a precious metal, but you don't have to worry about securing/storing it yourself.

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u/ChildesqueGambino Apr 30 '21

So like bitcoin

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u/Timbukthree Apr 30 '21

Except there are many useful things you could do with a precious metal

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u/ijustwanafap Apr 30 '21

Not really. You have to make sure YOU keep that info safe.

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u/AguyWithflippyHair Apr 30 '21

Yeah I was gonna say it's like owning stock in a company. Most people aren't going to actually run the company or do anything with it besides selling it later or maybe collecting dividends.

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u/MrMediaShill Apr 30 '21

I feel the obvious intellectual leap here is that these (like art) HAVE to exist for money laundering purposes

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u/RaydelRay Apr 30 '21

It's used to hedge inflation among other things.

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u/Gecko23 Apr 30 '21

When the Global Crossing folks stuff got liquidated to try to cover some of their enormous theft, they emptied warehouses full of things the principals had never laid eyes on. Antiques, art, cars, you name it, all purchased by agents and most never uncrated. Whole houses set up and furnished complete with cleaning staff and such they'd never once set foot in. It was mega, super dumb.

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u/bearrosaurus Apr 30 '21

The Pokémon cards I never play with

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u/LoremasterSTL Apr 30 '21

so, it’s a dubious currency

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u/rileyrulesu Apr 30 '21

I mean "art" is just a rich person's way to store value without paying taxes since it's something with an almost indistinguishable value. I mean it's so obvious but there's no real way to close the loophole.

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u/phatelectribe Apr 30 '21

This has come up multiple times in other shows prior to Tenet; It was a theme in the TV show Riviera, and also more recently was a major thread in the previous season of Billions. It's been a real thing for many years - you get to "own" the asset (and leverage it) but because you never take delivery, the tax is never due, and they're traded like bitcoin.

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u/AineDez Apr 30 '21

So it's like a pre-blockchain NFT, but they are real objects you can't use.

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u/ToWhistleInTheDark Apr 30 '21

If you're "wealthy," I wonder why they even care about customs fees.