For years, the IRS denied a estate tax valuation discount to works of art that had split ownership and other restrictions on sale. However, a recent Tax Court and 5th Circuit Court of Appeals ruling has upended this restriction with valuation discounts now being offered in spite of the seeming restrictions in section 2703. The Tax Court applied a flat %10 valuation discount but this approach was rejected by the 5th Circuit which agreed in principle with allowing a discount but did not outline a method to determine the amount. Going forward, new rules and regulation will have to be developed but they could wind up giving a large estate tax saving to any pieces of work that are inherited between multiple heirs.
See Marjorie W. Hornaday & Ronald D. Spencer, Art Law on Estate Tax on Inherited Collections, Artnet News, August 23, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
