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Killing the estate tax could help art sales, Sotheby's CEO says

  • Eliminating the estate tax could actually lead to more major art collectors putting big works up for auction, Sotheby's CEO says.
  • Tad Smith says getting rid of the tax would allow families to sell an asset without worrying about the timing or impact on the estate.
  • Smith also says wealthy art collectors are feeling "optimistic" ahead of the big November sales in New York.

Eliminating the estate tax could actually lead to more major art collectors putting big works up for auction, Sotheby's CEO told CNBC.

Attorneys and art experts have said that killing the estate tax would help wealthy families hold onto their art collections, since they would no longer have to sell to pay off taxes. That would mean fewer works donated to museums or coming up for auction, they say.

But Sotheby's CEO Tad Smith told CNBC that the estate tax actually puts a lid on sales since families wait until a family member's death to put works up for sale. That's because of the "step-up in basis" in which assets like art that have appreciated over the years are readjusted to their current value when they are passed down to heirs.

Eliminating the estate tax would allow families to sell an asset without worrying about the timing or impact on the estate.

"A lot of people delay selling their art or transacting in the art market until some event happens, until the estate tax kicks in," he said. "So eliminating the estate tax is a reason to eliminate the delay. So I think it will provide more liquidity to the market."

In sum, he said, "it's a good thing."

"Mao" by Andy Warhol

Smith also said wealthy art collectors are feeling "optimistic" ahead of the big November sales in New York. Sotheby's just racked up $404 million in sales at its Hong Kong auctions, up 42 percent over last year. And its sales at Frieze Week in London totaled $114 million, up 10 percent from the prior year.

"We're seeing a lot of inventory coming to market this year and collectors are generally feeling pretty good about it," he said.

The stock market's double-digit gain this year certainly helps, he said, adding that "anything, including the stock market, that enhances confidence is a positive thing."

The big test will be the November sales, however. Sotheby's most valuable lot is a massive "Mao" by Andy Warhol, expected to fetch $30 million to $40 million. It also has two important Monets — a summer garden scene that could fetch $20 million to $30 million and a scene of ice on the surface of the water that could fetch $18 million to $25 million.

Another big headline maker will be a painting by Jean-Michel Basquiat that was owned by Yoko Ono, which could fetch $9 million to $12 million.

The biggest headline maker of the November sales, however, is a lot at Christie's — Leonardo da Vinci's "Salvator Mundi," which could fetch over $100 million.

Smith said that Christie's decision to pair da Vinci's portrait of Jesus with Warhol's massive "Last Supper" work was "brilliant marketing."

"I wish we had done it, we didn't. One of our competitors did and they did a really great job," he said.

Despite the work's controversial history, and being at the center of a massive art battle between a Russian collector and his dealer, Smith said the piece will do well on the auction block.

"It's the last Leonardo in private hands, there are only 20, and it's a masterpiece of unimaginable beauty. What can you say?"

"Les Arceaux des Roses, Giverny" by Claude Monet will be auctioned by Sotheby's.