Art Valuation
, CLU, ChFC, recently published his article entitled Valuing Art for Tax Purposes, J. of Accountancy (July 2010). The executive summary provided by the author is below:
- Artworks are often donated for a charitable deduction for income tax purposes or valued as a gift or part of a taxable estate. CPAs need to make sure that clients have obtained a qualified appraisal of a fair market value that can be successfully defended in a return examination.
- For items of art valued at $50,000 or more, taxpayers may rely upon a statement of value from the IRS, in a procedure similar to that for obtaining a private letter ruling.
- Tax returns selected for audit that involve artwork with a taxpayer-claimed appraised value of $20,000 or more are reviewed by the IRS Art Advisory Panel of experts. The panel may accept the taxpayer’s qualified appraisal or recommend a different value. In 2008, the panel adjusted estate and gift valuations upward in the majority of the cases it considered, by an aggregate of 91% of taxpayer-submitted values.
- Causes of valuation disputes with the IRS can include art market volatility and questions of an artwork’s authenticity and legitimacy of its provenance. Also, the IRS has challenged blockage discounts applied by taxpayers to collections of artworks.
- As with other tax-related valuations of personal property, a qualified appraisal prepared by a qualified appraiser is essential. Credentials for fine art appraising usually include membership in a professional association and adherence to the substance and principles of the Uniform Standards of Professional Appraisal Practice.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.
Posted in: