Tax fraud

For the very rich the current capital gain tax is 23.8% and the current top income tax rate is 39.6%. If these rich people can move income from the ordinary tax rate to the capital gain tax rate they can save a ton in taxes. Mr. A buys a painting for 50 million dollars and holds it for number of years and then sells it for 100 million. At the same time his friend Mr. B buys another painting for 50 million and sells it for 100 million. Then each of them donates their paintings to charity to get a 100 million dollar deduction against their current ordinary income. In the current market these paintings are bought and sold by people who represent private buyers and sellers so we don’t know who they are. Mr. A had to put up 50 million to buy the original painting but when he sold it for 100 million he got his money back plus 50 million in profit. Normally he would pay capital gain tax on that profit but when he gives it to charity he gets a 100 million deduction. In Minnesota we have 9.5% state income tax for high earners so Mr. A’s total tax savings is 50 million dollars. Now what is not known is that Mr. A and Mr. B concocted this deal in advance. They agreed to buy each other’s painting at the highest auction price thus the 100 million sales tag. I have no proof that this sort of thing happens but I have noticed over the past 40 years or so that paintings have sold for very high prices and that the buyers and sellers are anonymous people whose deals are arranged by agents over the phone.