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Posted (edited)

The collection is growing and I am building a 'car barn'. Thinking about incorporating a Museum. I am not willing to sit by the door and sell tickets but have it open for appointments for visitors and car club events. Educational projects could give me benefits helping young people and more tax benefits too me. I like the idea of meeting people and I think this could be set up in a way that can shelter taxes. I can set up a 501c3. I vaguely understand how this could work.

 

Any ideas how to begin? 

Edited by CatBird (see edit history)
Posted (edited)

1. Call your accountant.

2. Call your city zoning board.

3. Call your attorney.

4. Call your attorney.

 

As someone who circulates in the industry and buys and sells a lot of cars, I can say that the IRS is now looking VERY closely at how collectors manage their cars and their money. State governments are doing the same. Car collectors are notorious tax cheats and they know it, but catching them is problematic since it's often cash with one guy helping another guy lie to the government. Museums, charities, and other tax-exempt shelters are a big red flag as big collectors look for a way to avoid taxes. You can expect heavy scrutiny when you try to set one up and probably some substantial regulation if you get it up and running. I have a number of clients who have tried and only one who has succeeded, and it's only because he has a building that acts as a virtually functional dealership for a defunct marque for which he is an acknowledged expert. I have to wonder if he saves enough on taxes to make the other legal requirements worthwhile?

 

Car guys continue to stick their thumbs in the government's eye regarding taxes and while I know taxes suck and they shouldn't be able to tax something that has already been sold once, they do and that's how it is. Everyone poo-poohs me when I tell them that the noose is tightening, but I see it happening all the time. Daily I get a call from someone asking me to be an accomplice to their tax evasion. Monthly I get a call from a guy who bought a car from me telling me that he needs a new title because his DMV confiscated his when he tried to lie to them to save on taxes. Occasionally I hear about collectors getting audits. And it isn't just stupid guys telling the lady at the DMV counter that he paid $100 for a 1937 Cadillac (which I saw happen earlier this week at the DMV--the dope told the lady he only paid $250 for a 2014 Ford F150 and she just laughed him out of the building). It's smart guys with resources trying to dodge the tax man and they're very much aware of it.

 

It's certainly possible, just get your experts involved first, before you go too far. It's a great idea and a wonderful thing to preserve the hobby and help educate a younger generation, and I'm certainly not suggesting that you're trying anything shady. But a good fraction of the collectors who set up "museums" to shelter their collections are doing so simply to avoid taxes and The Man knows it.

 

Edited by Matt Harwood (see edit history)
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Posted
9 minutes ago, Matt Harwood said:

Call your attorney.

Call your attorney.

 

As someone who circulates in the industry and buys and sells a lot of cars, I can say that the IRS is now looking VERY closely at how collectors manage their cars and their money. State governments are doing the same. Car collectors are notorious tax cheats and they know it, but catching them is problematic since it's often cash with one guy helping another guy lie to the government. Museums, charities, and other tax-exempt shelters are a big red flag as big collectors look for a way to avoid taxes. You can expect heavy scrutiny when you try to set one up and probably some substantial regulation if you get it up and running. I have a number of clients who have tried and only one who has succeeded, and it's only because he has a building that acts as a virtually functional dealership for a defunct marque for which he is an acknowledged expert. I have to wonder if he saves enough on taxes to make the other legal requirements worthwhile?

 

Car guys continue to stick their thumbs in the government's eye regarding taxes and while I know taxes suck and they shouldn't be able to tax something that has already been sold once, but they do and that's how it is. Everyone poo-poohs me when I tell them that the noose is tightening, but I see it happening all the time. Daily I get a call from someone asking me to be an accomplice to their tax evasion. Monthly I get a call from a guy who bought a car from me telling me that he needs a new title because his DMV confiscated his when he tried to lie to them to save on taxes. Occasionally I hear about collectors getting audits. And it isn't just stupid guys telling the lady at the DMV counter that he paid $100 for a 1937 Cadillac (which I saw happen earlier this week at the DMV--the dope told the lady he only paid $250 for a 2014 Ford F150 and she just laughed him out of the building). It's smart guys with resources trying to dodge the tax man and they're very much aware of it.

 

It's certainly possible, just get your experts involved first, before you go too far. It's a great idea and a wonderful thing to preserve the hobby and help educate a younger generation, and I'm certainly not suggesting that you're trying anything shady. But a good fraction of the collectors who set up "museums" to shelter their collections are doing so simply to avoid taxes and The Man knows it.

 

1

 

 

End of story. Nevermind. I never want to wave a red flag in front of a dangerous bull who can ruin your life with a form letter. 

Posted

I agree with Matt, it's a minefield when it comes to old cars and taxes.  At some point it's going to get pretty nasty.  Virginia now, for example, doesn't take the value of an antique car as part of you valuation for personal property tax.  I can see that changing at some point, and it's going to be ugly for those with numerous cars.  Also, you can try to claim low value when you register or title it, but that can backfire if the DMV catches you, or you pass on and your family has to deal with a basis value for your cars when selling them.

 

I was friends with a collector of Classic cars, he had 50 plus (he's gone now), and I can tell you he kept accurate records to the penny of what was spent on each car.  If one of his employees spent an hour charging the battery and filling with gas, that hour was charged to the car and added to the basis as a cost.  The more money one has, the more one has to be careful to not skirt the law.

 

There are strict rules on setting up a 501c3, basically it's a charitable non profit, so let's say you buy a Duesenberg for a million, sell it for a million five....then you cannot personally benefit from that gain in cash assets in the 501c3.

 

A foundation is what a lot of people set up, and of course these have been in the news lately.  A foundation is also a charitable non profit, the difference is that the rules, while strict also, are different.  A foundation has to distribute 5% of it's value every year to a charity.  But, you can pay yourself and family members a salary with foundation money, so there is a way to get money out while still having some tax benefit.  If you can get outside people to contribute to the foundation, let's say a foreign county, then it's REALLY a good deal for the foundation owners.

 

There are a lot of private museums in the US, so finding out the rules shouldn't be too difficult.

Posted

Always remember that the Chicago mob - Capone, Nitti, etc. were brought down in the early thirties by tax evasion charges - nothing to do with strong arm tactics and murder.

 

The IRS can come in and close you down, lock the door, and seize your assets overnight.

Posted

Let me add to what Matt left out. Call your insurance company, and call your insurance company again. The first person to "slip" in your "museum" will own a couple of your cars.

Posted

Be very careful. An incorporated, non-profit museum may exclude you, the owner, from a position other than docent. LAWS require professional curators for many of the positions. I got involved with this and learned it was a move far too regulated.

 

I think I still have an operations manual for a car museum that I bought from Uncle Sam back then. I will see if I can lay my hands on it. It was not a warm and cozy bedtime story.

 

Keep it personal and pay the tax.

Bernie

Posted
5 hours ago, CatBird said:

... I am not willing to sit by the door and sell tickets but have it open for appointments for visitors and car club events....

 

Regardless of its tax status, your idea to open

your private collection to visitors and clubs is a generous one.

Some of our AACA members have done exactly that 

over the years and generated quite a lot of good will

for themselves and the hobby.  Numerous tours,

both local and national, have stopped to see their collections.

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Posted

Get a very good lawyer and an even better acountant. Keep both on retainer and double your insurance coverage over what ever they say is a good amount.  Other than that no idea - have fun

Dave S 

Posted

I'd be glad to sit down (or email/phone call) with you and talk about funding a trust via life insurance for your museum! It can be a great way to keep a collection together and protected from a fire sale upon death as well. I live in PA but lived in Atlanta before so I do have my GA license. 

Posted

He is gone now, or I would suggest talking to Edward Towe about the idea. You might learn a bit by googling his name. Mostly along the lines of what has already been said.

 

I have seen quite a few private collections, either by going on club tours, or knowing the right people. Not many private collections make it as museums, for a lot of reasons. The Nethercutt Museum may be one of the few exceptions. (And that one, I have not been to believe it or not!)

 

While it must be nice for private collectors to get their hands on many of the best cars hidden away in private collections (a joy no doubt I will never know as I will never have the kind of money to buy such things), I personally think it is sad that entire collections get sold off so readily in the years following the passing of a great collector. Bill Harrah tried to set up his collection for survival, but his heirs changed that. I knew Jack Passey for many years (my dad went to college with him). He and so many of the collectors that began this hobby that I never met, I would think should have had a major part of their personal collections preserved in their remembrance. Maybe I am silly that way. But that is how I feel.

 

The recent Bothwell collection auction also comes to mind.

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Posted
3 hours ago, wayne sheldon said:

Bill Harrah tried to set up his collection for survival, but his heirs changed that

 

There is some talk that the IRS changed that, by refusing to allow Harrah to move the cars into a trust.  The collection was not owned personally by Bill Harrah, but rather it was kept as an asset of the Harrah's casino.  Thus, when the time to sell came after his death, the casino was sold to Holiday Inn lock, stock, barrel, and cars.

 

As is well known, there was such an uproar when the announcement came that all the cars would be sold, Holiday Inn crawfished slightly and the city of Reno was able to acquire some of them for the current museum, cars either gifted or money raised to purchase.

 

Crawfished means "backed up", a reference to how they swim, to those of you not from the deep South!

Posted
5 hours ago, wayne sheldon said:

While it must be nice for private collectors to get their hands on many of the

best cars hidden away in private collections (a joy no doubt I will never know

as I will never have the kind of money to buy such things)...

 

Wayne, you shouldn't have any regrets!  There are plenty of 

private collections that include cars of more modest value.

And some large collections might be the WORST place

from which to buy a car:  When a collection gets past a certain

tipping point, the cars are rarely used and may not be

sufficiently maintained to be reliable.

 

I admire excellence, not money, and can be just as happy with a

$5000 car as with one much more expensive. 

Posted (edited)
40 minutes ago, John_S_in_Penna said:

 

Wayne, you shouldn't have any regrets!  There are plenty of 

private collections that include cars of more modest value.

And some large collections might be the WORST place

from which to buy a car:  When a collection gets past a certain

tipping point, the cars are rarely used and may not be

sufficiently maintained to be reliable.

1

 

Sadly true. Exactly what happened to me. The previous owner had about 300 cars. Most were not driven after-acquired. Luckily I got were more often driven as these were some of his personal favorites.

An outstanding good example of cars that are regularly driven is the Coffer collection "Stable of Thourobreds" These are regularly driven at least 50 miles often by a full-time curator, Cecil;. 

http://www.thecofercollection.com/


My collection is being driven and will more be so driven when I complete another warehouse/museum for them.

Regarding making our collection as a museum, I am putting this aside due to questions by the IRS. I am a good taxpayer as I abide by the Law. For instance, I drive by the speedometer and not worrying about having to watch for the police!

 

But my guiding passion is about people and getting my cars available to people to enjoy these "time machines." I regularly drive even our exotic cars and when I stop and when people ask if they can take a picture, I invite them to sit in the driver's seat and let le take them a picture of them with their camera. I have never had a car hurt by this practice, and have had more than a few people come out of the car with tears of joy because they "had ever wanted to even see one" and now they have a memory in their own camera.

 

This is what it is all about! When people ask me if I am worried about someone running into me, or stealing a car out in public? I tell them that both God and Hagerty is riding with me. And THIS is true!

Edited by CatBird (see edit history)
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Posted
Just now, CatBird said:

 

Wayne said

While it must be nice for private collectors to get their hands on many of the best cars hidden away in private collections (a joy no doubt I will never know as I will never have the kind of money to buy such things), 

Wayne, please come visit us in Atlanta. You and others here, are welcome. I am very pleased to have you all experience the grand old cars. Bring your family and the kids!

Posted (edited)
5 hours ago, CatBird said:

My collection is being driven and will more be so driven when I complete another warehouse/museum for them. ...
But my guiding passion is about people and getting my cars available to people to enjoy these "time machines."...

both God and Hagerty [are] riding with me. 

 

Bill, you say you've been in the hobby for 4 years.

I'm overjoyed to read from you what I quoted above:  You have found

what makes the hobby truly enjoyable.

 

Some people may jump into the hobby thinking of possession and pride;

then, after a while, they may tire of it and get into something else.

But you have found the hobby's true substance.

Whether you keep 3 cars or 30 cars, you'll do well.

Edited by John_S_in_Penna (see edit history)
Posted (edited)

There's a local guy here who has large collection housed in the basement of his business.  While he doesn't openly say it, I think he has it set up as a 501c3.    Once a year in the fall he has an open house that's open to the public.  They used to just make everyone sign a guestbook (that proves to the IRS it is a museum and people are visiting.)  Now the past couple years, after signing the guestbook, they also take an individual picture of you (again, proof to the IRS that people were there.)   They have it all set up like an assembly line as you enter.   Attendance for the open house is also good, as he provides free food.   

Edited by K8096 (see edit history)
Posted
16 hours ago, John_S_in_Penna said:

....found what makes the hobby truly enjoyable.

 

But you have found the hobby's true substance.

Whether you keep 3 cars or 30 cars, you'll do well.

 

 

Thank you, John. Life is about people and people keep your passion alive. 

 

Which picture stirs your soul? Our 1923 Depot Hack. We are putting up signs "Touch The Car!" Cars are made for people to enjoy.
 

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13416903_1428105827214827_464502781928424761_o.jpg

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