Gifts to Museums May Boom in `91

IF there's a Matisse languishing in the attic or an Andy Warhol on the backstairs landing, wealthy donors to museums and galleries will find 1991 the ideal year to donate it, thanks to auction gavels and tax changes. For the past five years, potential donors have been so dazzled by the soaring auction market for Impressionist and contemporary art they could hardly afford not to put it under the gavel. For the same five years, a 1986 federal tax law has allowed them to deduct only the price they paid back when they bought the art. The law has left museum and gallery directors with tin cups in hand, begging for donations. The fall of the art market - combined with a new tax law making donations more attractive - could mean a bonanza for museums.

In anticipation of the stringent 1986 tax laws for donors, $103.8 million worth of objects were donated, according to the American Association of Museums. The value of the amount donated last year fell to $60 million. The number of art works donated plunged from 693,295 in 1986 to 368,000 last year.

It's easy to see why: A collector who bought a Picasso for $4,000 in the 1920s, for instance, could base his deduction only on that purchase price, rather than the $40 million it might be worth at full market value today.

Art prices had been so high that some investors turned to Van Goghs, Renoirs, and Picassos instead of pork belly futures or junk bonds for high profits. The current top sellers, according to the Associated Press, include Van Gogh's ``Portrait of Dr. Gachet, at $82.5 million, Renoir's ``Au Moulin de La Galette,'' Picasso's ``Au Lapin Agile'' at $40.7 million, and Van Gogh's ``Sunflowers'' at $39.9 million.

But prices on non-star art began tumbling last spring and went into free falls in autumn sales at Sotheby's and Christie's, the leading auction houses. Van Gogh's still life ``Vase With Cornflowers and Poppies,'' estimated to sell at $12-to-$16 million, failed to sell at all in November at Christie's. The Henry Ford II collection auctioned at Sotheby's in November brought in $18 million for Renoir's ``Cup of Chocolate,'' but Modigliani's ``Portrait of Morgan Russell'' brought in only $6.25 million.

In the previously hot market of contemporary art, paintings by Andy Warhol, Mark Rothko, Jasper Johns, and others were among those that sold for substantially less than prices estimated by Christie's in November.

Now the very shooting stars that had lit up the market have collided, and the plummet of prices for the first time in five years has worked to the benefit of museums and galleries. As one of its last acts before recessing this year, Congress passed a law that gives donors fair market-value deductions.

Who wins in this free fall of prices and the tax changes?

John Marion, chief auctioneer and CEO of Sotheby's, says, ``Obviously it's to the benefit of museums and institutions in the United States. It's a wonderful thing. Who profits? Civilized man. ... The people won, and the museums benefit. I hope it will go back to the way it was before, so that the institutions building great museum collections in this country will find that, beside the only other course of donating money, they now can add to those collections [again]. And I hope for an extension of this law, to go back to where it was before '86.''

Rep. Sidney Yates (D) of Illinois, the heavy muscle for the arts on the House Appropriations subcommitee, who routinely saves the National Endowment for the Arts' budgetary life each year, says an extension of the law may be in peril. He lobs a grenade:

``We're going to have to take a really incisive look at the costs of Desert Shield, and what the new military outlook is, and what commitments are made to various countries to get [them] to go along with us and join in military activities in Desert Shield, and that will be coming out.

``We know about Egypt, and cancellation of that $8 billion debt. What was promised to Syria? I don't know the answer. What promises to China, promises to other countries? The whole budget situation is such that they may decide they can no longer indulge in the kind of revenue loss reflected in this. No, it's not billions, but you're talking about millions ... if someone wants to give a Van Gogh worth $30 million to $50 million to a museum. The market value is still high.''

Sen. Daniel P. Moynihan (D) of New York estimates the tax cost to the Treasury at $22 million.

There are collectors who, up until now, felt they couldn't sacrifice the millions which could be made from Midas prices at auction. And there are other collectors, like Washingtonian Joshua Smith, whose collection was culled for the stunning exhibition ``The Eighties'' at the National Gallery to much critical praise.

Mr. Smith says, ``Decline in the value of art shouldn't make a difference in donations. They'd get smaller deductions if they donated, smaller prices if they sold. ... If you do intend to donate at all and were holding back because of the tax laws, this is a great incentive to donate in the next year. ... If a donor has real charitable intent in mind, in the past the tax law penalized, so it was financially ridiculous to donate. You wouldn't get any benefit at all.

``My own feeling about it is that others [who] hesitated in the past, because of this penalty effect, and didn't donate, were holding on till the tax laws were better. ... This year will be a window.''

Are there donors standing in the wings with Renoirs and Rauschenbergs tucked under their arms, who have been waiting to donate them to their favorite museums or galleries.

``We are hopeful in due course they will,'' says National Gallery director J. Carter Brown. ``One problem so far is that the new tax law is on a one-year basis. And some donors may not be convinced about [art market] prices yet. So this might not have an immediate effect. We'll have to wait and see what the effect will be. Certainly it should be better. It remains to be seen as people work it out with their individual tax consultants.

``We haven't heard yet on potential donors,'' says the Gallery director. We sent copies of stories [about the tax law] out. We wanted to make sure our good donors were aware this had happened, including those who had said, `Come back to me if the tax law changes.' But it's still not clear enough, because there was no mention in the new tax language of the normal ability of a taxpayer to carry over the benefits for five years, if it's not absorbed all in one year. We will need a ruling from the Treasury, and have written to the Secretary of the Treasury to alert him....''

When asked about prospects for donations next year, Earl (Rusty) Powell 3rd, director of the Los Angeles County Museum of Art, says, ``I'll give you a speculative answer at best. I'm not convinced the drop in auction prices is going to be around for that long a time. There are still high prices being paid for very fine things. ... There seem to be fewer great masterpices in this market. It's hard to tell what a change in tax laws [will bring]. It should bode very well for both museums and donors.

``Certainly the museums stand to benefit from the circumstances that did allow their collections to develop before 1986. All the fall-off in donations as a result of tax laws demonstrated that. It remains to be seen whether increases will be substantially felt in 1991. This recession, downturn - whatever it appears to be - will create a climate not necessarily conducive to giving.

``This is a very complex tax subject; they have written new computer programs to handle it. The trade-offs are thorny. Some donors may wait till the year ends to take stock of deductions.

``The bottom line is that anyone who wants to give art to a museum better listen up this year; 1991 could be the best chance to do it. It's worth looking into, not putting off. It could be a wonderful moment to do it.''