Eva Rosenberg is a tax columnist for Marketwatch and the child of Holocaust survivors. After viewing the new movie about the restitution of Klimt’s portrait of Adele Bloch-Bauer, she thought through some interesting tax issues. It turns out that the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), contains language saying there is no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates. Fifteen states enacted similar laws. But the issue was not so simple:

Understanding that Altman would have to sell the paintings, he realized that the taxes could be crippling. So he contacted her Congressional representative and recommended that another line be added to EGTRRA. And it was:

“For purposes of such Code, the basis of any property received by an eligible individual (or the individual’s heirs or estate) as part of an excludable restitution payment shall be the fair market value of such property as of the time of the receipt.”

Brilliant! In English, that meant that if Altman sold the paintings relatively soon after receiving them, she would face no taxes at all on the sales proceeds.

Not only did this young attorney succeed in getting back over $325 million worth of artwork, but he also made the transaction tax-free. In fact, since there were commissions paid to Christie’s (about 12%) and attorney’s fees (approximately 40%), there should have been quite a tax loss on the final transactions.

Does ‘The Woman in Gold’ pay taxes?  (MarketWatch)