Wednesday, February 21, 2007

American Relics

$1,500,000 is a lot of money--about the lifetime wages of the average American worker. But it seemed to me a fair price for the handwritten manuscript of George Washington's 1783 speech resigning his military commission.

This document is a relic not only of the man, but of an historic moment cementing the American principle of civilian rule over the military. In the hands of the State of Maryland, it is also a physical reminder of the most notorious event to occur in the state's historic Capitol Building--at that time the Capitol of the United States. The draft contains Washington's own edits, revealing, for example, that he replaced "I here deliver my commission" with the humbler "offer," and that he deleted the words "final" and "ultimate" from his "farewell,"--perhaps foreshadowing his return to public life as the nation's first President.

Yes, I thought, the State's commitment of $1,500,000 was a fine reflection of our values.

But then I discovered that bidding on Britney Spears' hair begins at $1,000,000.


  1. Most archival sales/donations are complicated negotiations over things like value for tax deductions and deeds of gift.

    Would Britney's hair count as taxable income?

  2. Well, it's interesting that you should ask this, because in fact the manuscript acquisition was a complex transaction in which the nominal price was set at $1.5 million, the state paid $600,000, two private donors gave an additional $200,000 each, and the owners donated the remaining value of $500,000. (To anyone but a tax attorney, that means the owners actually sold it for $1 million.)

    Re Britney's hair, as abandoned property converted to the sellers' possession, it would be taxable as ordinary income at its fair market value. One could argue what that figure is--zero, the auction price, or somewhere in between. Most probably the auction price, given the proximity in time between the acquisition and the auction.

    But it doesn't actually matter, because the sale is taking place less than one year after acquisition, so the sellers will owe short-term capital gains taxes (which are levied at the same rate as ordinary income) on the difference between the amount they reported as taxable income and the amount they realized at auction.

    Now, if they were to keep the hair more than one year, the question would then become whether pop star hair is a "collectible," which receives less favorable long-term capital gains tax treatment than other capital assets.

  3. Wow. I hope someday to ask a question that a) is as interesting as that one and b) inspires such a detailed answer. I thought, "hey, I'll ask about this in the context of Ebay's forbidden items policy!" But I found the uninteresting answer all by myself.

    I dare to dream, though. One day.


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