Thursday, December 14, 2017
I try to tell my students that where the rubber hits the road for many tax issues is in valuation. Here's a great story about one aspect of valuation disputes from the Washington Post Magazine: "The Secretive Panel of Art Experts That Tell the IRS How Much Art is Worth"
Each year, bequests and donations of art generate tens of millions of dollars in potential tax revenue. But to be accurately taxed, an artwork needs to be accurately valued, and the owner who has to pay the tax can’t be expected to provide the last word. When an artwork is sold outright, the Internal Revenue Service needs no help in determining how much to tax; it has the purchase price and the sale price and it knows how to subtract. (The maximum federal tax rate on profits from the sale of art and collectibles is 28 percent, higher than the 15 to 20 percent for stocks.) Things get trickier, however, when an artwork passes to an heir or is given to a museum. The agency still needs to know, as of the date of death or donation, how much the art is worth, but without a current sale price that figure can be debatable.
So the IRS turns to a secretive, little-known body called the Art Advisory Panel ... to figure out the value of works of art. The group, consisting of up to 25 members, includes curators from such well-known institutions as the Los Angeles County Museum of Art and the J. Paul Getty Museum