Nicole Lapin

Step four, use the art as a financial tool.

Now that the painting is worth $20 million, the owner has three options, none of which involves selling the work.

There's option A, borrow against it.

Banks and private lenders now offer art-backed

loans you can borrow up to 50 of the appraised value of your painting tax-free because remember loans are not income so they're not subject to income tax so if your art is worth 20 million dollars you might take out a 10 million dollar loan against it and use that money however you want you could buy real estate you could fund a startup you could fly to space

Whatever.

Option B, donate it for a tax write-off.

If the owner wants to look charitable and reduce their taxable income, they can donate the painting to a museum.

Since the artwork was appraised at $20 million, they can claim that full value as a charitable deduction even if they only paid $5 million for it.

This tactic has been used by

countless collectors.

The IRS has challenged some of these appraisals in court, but most donations go through without a hitch.

And option C, let it sit and

Some countries don't charge capital gains taxes on artwork.

Switzerland, for example.

So if the painting appreciates from $5 million to $50 million while sitting in Geneva, the owner can eventually sell it without paying taxes on the appreciated value.

So let's do say that you let it sit and appreciate.

And now the piece is worth $50 million.

Here's where step five might come in.

Clean, dirty money.