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Monday, July 23, 2012

More on Estate Planning for Illegal Assets

Canyon 2Following up on my previous post, Estate Planning for Illegal Assets:

What is the fair market value of an object that cannot be sold?

The question may sound like a Zen koan, but it is one that lawyers for the heirs of the New York art dealer Ileana Sonnabend and the IRS are set to debate when they meet in Washington next month. The object under discussion is Canyon, a masterwork of 20th-century art created by Robert Rauschenberg that Mrs. Sonnabend’s children inherited when she died in 2007.

Because the work, a sculptural combine, includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero.

But the IRS takes a different view. It has appraised “Canyon” at $65 million and is demanding that the owners pay $29.2 million in taxes.  

(Hat Tip: Mike Talbert.)

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Comments

Not only are the so called owners barred from selling the work, but (from the NYT):

"the government revisited the issue in 1998. ... Mrs. Sonnabend was then able to retain ownership as long as the work continued to be exhibited at a public museum. The piece is on a long-term loan to the Metropolitan Museum of Art in New York, which Mr. Lerner said insures it ..."

They are also barred from possessing it.

The only right the owner's have is to reclaim the work if and when the law is changed. Given that the law has been in place for many years and there is no movement to repeal it, the odds against that are enormous. An appraiser under applicable standards must find that the value is infintesimal.

Side not about things I do not know. If Indians are, under some circumstances, allowed to posses eagle feathers, could an Indian buy the work from the Lerners?

That caveat aside, if I were the Judge, I would dismiss the case, and give the IRS lawyers a tongue lashing and Rule 11 sanctions.

Posted by: Walter Sobchak | Jul 23, 2012 4:30:54 PM