Art Valuation Policed By The Art Advisory Panel
October 16th, 2013
Whenever a U.S. taxpayer dies or gives away valuable art—or any time it changes hands other than through a sale—Uncle Sam has an interest in knowing its true value. The art panel protects that interest, by vetting values submitted by taxpayers or executors; in other words, they make sure the deduction for the donation of that Jackson Pollock masterpiece is accurate.
Do you have any valuable art in the family? If yes, then you need to be more than familiar with the Art Advisory Panel. Its opinion is potentially your burden. When it comes to taxation, no one likes surprises.
The Art Advisory Panel is, in the history of the tax code, a fairly new invention dating back to 1968. Despite its relatively recent existence, the influence of the Art Advisory Panel has only increased over the intervening decades as the value of art itself has skyrocketed.
The Wall Street Journal recently provided an introduction to the Panel in an article titled “The Art (Tax) Police.”
Practically speaking, the value of art is ambiguous at best, and yet it is also very real. Just because you regard a painting as “priceless,” some potential purchaser just might give you, your estate, or your heirs a very definite and taxable price for it. The Art Advisory Panel exists to double-check your numbers on the real-world taxable value of the artwork for the purposes of the assessment of taxes or even charitable deductions. Consequently, the Panel truly is the tax police of the art world, scrutinizing any piece of art assigned a value of more than $50,000.
Happily, the Panel finds in favor of the taxpayer about half of the time. Unhappily, those taxpayers on the losing end find themselves stuck with a larger than anticipated tax bill and, perhaps, penalties.
When it comes to the valuation of art, it is worth your time to get a qualified appraisal so you are well-prepared if the IRS calls in the art (tax) police.
To talk to Terry Bertram, an estate planning attorney about your estate planning needs, visit www.elderlawannarbor.com.
Reference: The Wall Street Journal (September 20, 2013) “The Art (Tax) Police”