Artists are taking advantage of low interest rates by selling their catalogs before a likely increase in tax rates — but the window may be closing soon to maximize returns.
Artists are taking advantage of low interest rates before a likely increase in tax rates – how long can the good times roll?
With these significant economic factors on the horizon, we are frequently asked by our artist clients “What should I do?”For recording artists earning meaningful royalties from catalogs in which they have full or part ownership -- who are considering selling before changes to the tax law -- the question of whether to proceed might feel like a double-edged sword. Yet, we crunched the numbers and the answers are both straightforward and convincing.
To offset the increase in tax rates, the royalty payment would have to rise from $1.3 million to $8.02 million if the sale of the catalog was delayed by one year. If the artist would rather sell in five years, the annual royalty payment would have to increase to $2.02 million and remain there each year for five years just to break even. And if the projects didn’t go as planned, she’d have to maintain her current income of $1.
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