Did Bob Dylan Sell His Life's Work For Tax Reasons?

Maybe he just needed the money?

Earlier this month, Bob Dylan sold the rights to his 60-year personal music catalog to Universal Music Publishing Group. While the sales price is unknown, his songs have been valued at around $300 million.

By selling the rights, Dylan no longer charges licensing and royalty fees for the use of his songs. In fact, he might have to pay licensing fees to the new owners to use the very songs he created. So it appears that he has opted to get a large cash payout in exchange for giving up future income streams from his music.

What would motivate him to sell his music now?

Some have speculated that it was for tax reasons. It is believed that the Biden administration would push for higher tax rates for high-income individuals. Even if Republicans maintain control over the Senate next year, it is likely they would agree to higher rates in exchange for other concessions.

So by selling his music now, he will take advantage of lower capital gains tax rates while they are still around.

But there are things we do not know. For example, what is the amount of his taxable gain? One way to minimize capital gains taxes is by calculating his cost basis in his music. To do this, we will need to know how much money Dylan spent in connection with creating his songs. Expenses such as studio recording and manager fees to name a few. Or did he purchase his own studio equipment? If he did, how much depreciation did he take on the equipment?

Dylan was not the only one to sell the rights to his songs. Stevie Nicks sold 80% of the copyright interest in her songs, which was valued at $100 million. Taylor Swift sold the rights to her first six albums for $300 million.

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By selling the songs now, Dylan will probably avoid paying higher state taxes in the future. Some states, have lost income and sales tax revenue due to the coronavirus. In addition, some will incur more costs, mainly due to unemployment claims. States will make up for this deficit by taxing higher-income people even further.

As for the corporate buyers of the copyrights, they will (at least temporarily) get more-favorable income tax treatment. The income from licensing and streaming will be subject to the lower 21% corporate tax rate. However, this favorable tax rate will likely be on the chopping block. Whether it will return to the old rates or a slightly higher rate remains to be seen.

There could be other, nontax reasons for the sale. Perhaps the income streams from licensing are not as high as they were previously. And money from live concerts are pretty much nonexistent. Or perhaps Dylan just needed the money.

The tax planning strategy of selling assets before a tax rate hike (whether real or proposed) is nothing new. People take this opportunity to sell businesses, key assets, or real estate. If the timing is right, the tax savings can be huge. But selling an important asset like the copyright to your songs is not a decision that should be taken lightly. Because you are taking a gamble and you might end up being wrong.


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Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.