Valuation of Art Objects for Estate Tax Purposes

By Englebrecht, Ted D. | The CPA Journal, September 2002 | Go to article overview

Valuation of Art Objects for Estate Tax Purposes


Englebrecht, Ted D., The CPA Journal


The valuation of art for estate tax purposes presents unique problems and challenges. The unpredictable nature of the art market, with changing tastes and styles, makes art prices volatile. The art world boomed during the 1970s and 1980s, when contemporary works as well as Impressionists were in favor. Today, record-setting prices may be set for anything from a Van Gogh painting to Jacqueline Onassis's collection.

Despite fluctuation in the retail art market, the responsibility for placing a fair market value on artworks for estate tax purposes remains with the taxpayer and the IRS. The process may be somewhat subjective, but the end result must be an equitable value.

Background

Property in general-real or personal, tangible or intangible-should be valued at its fair market value at the date of death, or at the alternate valuation date of six months after the decedent's death as provided by the IRC. Additionally, any interest such as joint or community property must be valued and included in the gross estate. The regulations define fair market value as the price at which "property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts."

Because the definitional guidelines provide little assistance in arriving at actual dollar determinations, the IRS has issued additional guidance to assist in the valuation of art for estate tax purposes.

Administrative Stance on Art Objects

Even though art objects, including paintings, sculptures, tapestries, silverware, and other artifacts, are subject to the general valuation rules for estate tax purposes, the valuation process and documentation required depend upon the value of the articles. Specifically, an art object valued at no more than $100 may be grouped with other articles on a room-byroom appraisal, with a separate value given for each item named. An executor is also allowed to submit an aggregate value as appraised by a competent appraiser or dealer.

For articles with artistic or intrinsic value of more than $3,000 or a collection of similar articles valued at more than $10,000, the appraisal must be made under oath by an expert who must also attach a statement of qualifications.

When an art object has a value in excess of $20,000, the valuation is automatically reviewed by the Art Valuation Group (National Office) of the Engineering and Valuation Branch of the IRS for possible audit. When the value is greater than $50,000 and substantiated valuation is desired, the IRS provides a procedure for obtaining this secure art value.

Pursuant to Revenue Procedure 66-49, the IRS would not approve valuations or appraisals prior to the actual filing of the associated tax return and would not otherwise issue any advance rulings approving or disapproving appraisals. Naturally, this led to uncertainty and rendered impossible a taxpayer's prior determination of the valuation of art property. To address these concerns, and in response to legislation enacted in 1993, the IRS promulgated Revenue Procedure 96-15, which modified Revenue Procedure 6649 by establishing a procedure for the issuance of a Statement of Value. A taxpayer could rely upon this to substantiate the value of art for income, estate, or gift tax purposes.

Revenue Procedure 96-15 applies only to items of art valued at $50,000 or more that were or will be transferred as charitable contributions, by reason of a decedent's death or inter vivos gift. In addition, under limited circumstances, the IRS may issue the Statement of Value for items appraised at less than $50,000 if the request includes at least one item appraised at $50,000 or more and the IRS determines that such a statement would be in the best interest of efficient tax administration. The IRS may also decline to issue a Statement of Value if it is in the interest of efficient tax administration not to do so. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Valuation of Art Objects for Estate Tax Purposes
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.