An art law riddle: What do Magritte’s La condition humaine and the charitable contribution deduction have in common? Both are surreally taxing on the mind. (Apologies, please read on). Despite this poor attempt at art law humor, Magritte’s painting and the tax law’s charitable contribution deduction inherently present a perplexing challenge for those trying to understand either the art or the law. Magritte’s La condition humaine, a painting within a painting, presents a peculiar representation of nature and art that demonstrates the paradoxical qualities of perception and even human existence. Similarly, a specific provision of the Internal Revenue Code’s charitable contribution deduction, enacted to encourage donations to nonprofit organizations by offering tax savings to the donor, surprisingly, actually discourages donations by artists of their art.

While Magritte may have painted La condition humaine over thirty years before the enactment of this particular subsection of the charitable contribution deduction provision, the painting can facilitate with an understanding of the tax law. The painting reveals issues with perception that assist with the alleged reasoning behind the tax law and related policies. The absurdity represented by Magritte’s La condition humaine thus parallels the treatment of artists under the Internal Revenue Code’s charitable contribution deduction and even provides a clue to the riddle that is tax law.

Magritte & La condition humaine

René Magritte (1898-1967) was a Belgian painter, sculptor, photographer, and film maker. As a major figure of the Surrealism movement, Magritte and his works are known for “consciously disrupting conventions for representing reality.” (Wijnbeek 2003). The Surrealist movement emerged from the spiritual and intellectual skepticism following World War I. At the same time, the popularization of Freudian theories of psychoanalysis fostered an interest in the subconscious and the irrational, with which the Surrealist grappled in their art. Surrealist paintings characteristically embrace a strong element of surprise achieved through unexpected juxtapositions that expose some peculiar facet of reality. (Ades and Gale 2003). A connoisseur of achieving this reaction, Magritte incorporated in his works a “visual jolt that exerts an irresistible attraction,” which some scholars have named the “Magritte effect.” (Gohr 2000, 10). Painted in a traditional style that nevertheless exudes a certain “coolness,” Magritte’s work serves as a mirror to the ordinary and banal, but the reflection reveals something wrong or even slightly disturbing. According to one scholar, Magritte’s “imitation of reality…seems to remain intact – until the baffling or unsettling effect of his works takes hold and we realize that the artist presents us with a riddle or paradox that he has no intention of unraveling.” (Gohr 2000, 10).

Magritte’s La condition humaine (1933) certainly presents the viewer with one of these riddles. The painting is of a view of a pastoral landscape. A small tree stands on the right of a lawn with a row of bushes at the edge of a forest and a sky full of clouds floating above the greenery. An unframed painting sits on an easel in front of the window obscuring the precise portion of the landscape that it supposedly depicts. The easel, the tacked rim of the canvas, and the minimal overlap of the curtain on the left serve as clues to the painting’s deceit. But what is really behind the painting? The viewer does not and will not ever know the true answer to that riddle.

The painting within a painting was a favorite recurring theme within Magritte’s oeuvre. The work comments on the act of painting and the nature of reality. (Whitfield 1992, 62). According to one scholar, “we never see things as they actually are and the artist never depicts them as he sees them; absurd therefore to think you are painting reality.” (Passeron 1972, 26). With La condition humaine, Magritte painted two “realities” with semi-indistinguishable boundaries: the painting on the easel and the view from the window. But in the end, the painting itself, La condition humaine, is not “real” at all but a fiction created in the artist’s mind.

Charitable Contribution Tax Deduction

Since 1917, the federal tax law has provided a charitable contribution deduction for the taxpayer/donor. The charitable contribution deduction rests on the theory that the loss of tax revenue arising from the deduction is offset by the government savings in not having to spend any funds to achieve the same public benefit as the donation. (H.R. Rep. No. 75-1860, at 19 (1938)). The charitable contribution deduction thereby acts as a government subsidy to increase the amount of social goods accessible to the public. (Yale 1979, 158).

The Internal Revenue Code (Title 26) permits the taxpayer/donor to take a deduction for a charitable contribution to a religious, charitable, educational, and similar nonprofit organization for up to a specified percentage of the taxpayer’s income. Under section 170 of the Internal Revenue Code, a charitable transfer is deductible only if the requisite property (including money) is transferred (i.e. the donor does not retain control) with the necessary donative intent to a qualified donee without compensation.

Amount of the Deduction

The amount of the deduction the taxpayer/donor may claim depends on the type of property donated. For long-term capital gain property, the amount of the deduction is the fair market value of the property at the time of the contribution. (Treas. Reg. § 1.170A-1(c)(1)). The fair market value is the “price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the relevant facts.” (Treas. Reg. § 1.170A-1(c)(2)). The fair market value is the sales price of the item in the market where the item is most commonly sold to the public. Long-term capital gain property is generally property held for more than a year that has appreciated in value during that time. Under these rules, a collector who has owned a painting for over a year before donating the painting to a qualified organization, for example, may deduct the fair market value of the painting on his income tax return.

However, under section 170(e), in the case of donated property which, if sold, would have resulted in ordinary income, the contribution is reduced by the extent of ordinary income that would be recognized upon the sale. (I.R.C. § 170(e)(1)(A)). Ordinary income property is property held by the donor primarily for sale to customers in the ordinary course of his trade or business. (Treas. Reg. § 1.170A-4(b)(1)). Charitable contributions of ordinary income property generate a deduction in the amount of the basis only. (Treas. Reg. § 1.170A-4(a)(1), (b)(1)). In the case of art, the basis is the cost of the canvas, frame, paints, and other supplies. An artist who donated a painting that she created to a qualified organization can, therefore, deduct only the cost of the materials used to create that work and not the fair market value.

This particular provision of the Internal Revenue Code somewhat illogically leads to the scenario that the donation of the same painting can produce two different tax outcomes depending on the identity of the donor as the artist or the collector. The provision also prompts the somewhat ironic outcome for the charitable contribution deduction by discouraging artists from donating their art to charitable organizations due to the absence of any tax savings. After the enactment of this provision, the number of donations to museums by artists immediately declined, ultimately restricting public access to contemporary works. (Yale 1979, 144).

Deducing La condition humaine & the charitable contribution deduction

La condition humaine and the charitable contribution deduction both present paradoxes that may surprise and defy our expectations. But can one provide an answer to the other’s riddle?

To assume or not to assume?

Both the painting and the law challenge our assumptions about art, the creative process, and even reality. Upon first viewing La condition humaine, one may believe that the landscape concealed by the canvas is the same landscape depicted in the picture. But this is just an assumption. The painting blocks the view outside the window, so one cannot be sure what lies beyond the painting. The view may be what is portrayed in the painting or something different. It also may be nothing – merely an illusion the artist created through paint and canvas. (Strick 1992, 202-203).

The charitable contribution deduction offers, in a way, a similar cognitive challenge that questions basic assumptions about tax law. A fundamental economic theory within tax law, horizontal equity, states that individuals with similar income and assets should pay the same amount in taxes. One assumes under this theory that similar taxpayers are treated similarly within the Internal Revenue Code. Upon a closer inspection of the law however, artists do not receive the same treatment as collectors for donating the same piece of property. Under section 170(e) as discussed above, artists may deduct only the value of the basis of the work and not the fair market value, severely reducing the amount of the deduction to perhaps nothing in some cases, if the artist has already deducted the cost of the materials as a business expense. An artist who makes an incorrect assumption about the value of their work for the purposes of the deduction would likely face civil penalties from the Internal Revenue Service (IRS). Consequently, in both art and law, suppositions provide only part of the story or in the case of the law, an inaccurate one, emphasizing the importance of looking carefully and critically.

A surreal answer in the mind of the artist?

Why do these particular riddles exist in this Internal Revenue Code provision and the painting? While it is difficult to articulate an artist’s intentions almost eighty-five years later, Magritte’s depiction or interpretation of the “human condition” (La condition humaine) reflects the intentions of the Surrealist artists to expose some facet of reality and to explore the workings of the human mind through psychoanalysis. (Ades and Gale 2003). In this manner, Magritte’s painting examines our subconscious way of looking and seeing. During a 1938 lecture, Magritte stated that La condition humaine challenges our assumptions of reality and art. Our mind, when looking at a work, fills in or interjects what is absent. According to Magritte, this is “how we see the world: we see it as being outside ourselves even though it is only a mental representation of it that we experience inside ourselves.” (Whitfield 1992, 62). Our perception of the world, including looking at a painting, reflects our own past experiences as remembered in our mind -- even past experiences as mundane as looking out a window.

Unfortunately for artists, the past certainly shapes the present predicament concerning the deduction. The Tax Reform Act of 1969 (P.L. 91-172, § 201(a)(1)(B)) added this particular provision to the Internal Revenue Code, prompted by a substantial deduction taken by President Nixon for the donation of his vice presidential papers. (Bell 1987, 536). According the legislative history of this provision, Congress did not intend the charitable contribution deduction to provide greater or nearly as great tax benefits in the case of gifts of property than would be realized if the property was sold. (S. Rep. No. 91-552, at 80 (1969)).

But taking a psychoanalytical approach looking into the “subconscious” of Congress (if one can argue that exists), Congress amended the tax law due to an incomplete or even irrational view of the relationship between law and the creative process. With this amendment to the tax law, Congress was primarily concerned with the subjective process of valuing art that potentially could lead to overvaluation and thus greater deductions and loss of revenue for the government. (S. Rep. No. 91-552, at 82 (1969); H.R. Rep. No. 91-413, at 55 (1969)). More specifically, Congress believed that with the incentive of the greater deduction artists would “paint a deduction” at income tax time, meaning that they would quickly produce a painting and donate it to the museum solely to realize the tax savings. (Bell 1987, 559).

But this scenario may only be true in the “subconscious mind of Congress” as it does not recognize the true operations of the creative process. This limited understanding or assumption by Congress ignores that fact that museums do not accept all donations but build their collection according to a master plan. Similarly, not all artists will donate their works anywhere but to institutions that coincide with their artistic mission and will provide care and suitable access to their works. (Bell 1987, 560). Taking an almost psychoanalytical approach towards the intentions of Congress reveals that the law may be overshooting its fundamental objectives in this case.

A potential retort?

What is the ultimate retort to these riddles? One scholar has written that Magritte had “no intention of unraveling” the riddle or mystery presented by his works. (Gohr 2000, 10). Ultimately, it is up to the viewer to decipher an answer or at least a response to the paradox inherent in Magritte’s paintings. For La condition humaine, the viewer may determine what he or she precisely believes is the view behind the painting on the easel. Magritte’s painting warns us, however, that our own idiosyncrasies or perceptions can cloud our view of reality and our search for truth. (Bohn-Spector 2002, 334). The truth depends on our own view and what we make of it, which is not always in command of the artist.

Unfortunately, such leeway does not exist with the law. The power to change the law lies with the original artist – in this case Congress. Congress has attempted to solve this problem with the Artist-Museum Partnership Act, which has been introduced several times in both the House and the Senate. (H.R. 1830, 115th Cong. (2017); S. 1174, 115thCong. (2017)). The proposed bill would permit a tax deduction by an artist equal to the fair market value of the work created by the artist and then donated to a charitable institution. According to Senator Leahy, one of the bill’s sponsors, “this reform would preserve cherished art works for generations by encouraging donations directly from artists.” (Carle 2017). Until the passage of the bill, however, the riddle of the charitable contribution deduction still remains.

A Window Into Tax Law

The combination of the surrealist La condition humaine and the charitable contribution deduction provision may at first appear to be too absurd to offer any insight into either the art or the law. But an examination into the ambiguities and context of both the painting and the law offers complementary tools to aid with observation. With this specific charitable contribution deduction provision, Congress ultimately breaks painting down into its basic, physical elements: paint, canvas, and the frame, at the expense of the creative process. But these elements alone or even together do not always make a work of art without both the artist and the viewer.

Magritte’s painting within a painting shows how an easel and a canvas, basic building blocks of art, can represent and even distort reality, but such a representation demands input by both the artist and the viewer to complete this deceit. Correspondingly, the shortcomings of the charitable contribution deduction arise from the law’s disregard or distortion of the artist’s creative process and the importance of public access to contemporary art -- the social aspects of art that embrace the relationship between the artist and the viewer. The answers to the “riddles” or challenges presented by both La condition humaine and the charitable contribution deduction ultimately lie with this shared factor: the human condition of the art and law.

Bibliography

Ades, Dawn, and Matthew Gale. 2003. Surrealism; Grove Art Online. Accessed July 25, 2018. http:////www.oxfordartonline.com/groveart/view/10.1093/gao/9781884446054.001.0001/oao-9781884446054-e-7000082410.

Bohn-Spector, Claudia. 2002. "Catalogue." In Deceptions and Illusions, by Sybille Ebert-Schifferer. Washington, D.C.: National Gallery of Art.

Carle, David. 2017. Press Release: Leahy Introduces Artist-Museum Partnership Act. May 18. https://www.arteducators.org/news/articles/309-leahy-introduces-artist-museum-partnership-act.

Gohr, Siegfried. 2000. Magritte. New York: Harry N. Abrams, Inc.

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I.R.C. § 170.

Treas. Reg. § 1.170A-1.

Treas. Reg. § 1.170A-4.

H.R. Rep. No. 75-1860 (1938).

H.R. Rep. No. 91-413 (1969).

S. Rep. No. 91-552 (1969).

Bell, Douglas J., Changing I.R.C. 170(e)(1)(A): For Art's Sale, 37 Cas. W. Res. L. Rev. 536 (1987).

Yale Law Journal Company, Inc., Tax Treatment of Artists' Charitable Contributions, 89 Yale L. J. 144 (1979).