A new case is causing quite the screech in the estate and gift tax realm as well as in the world of art appraisal. The heirs of an avid collector have already paid millions of dollars in estate tax for her collected artwork, but refuse to pay any taxes for one particular piece, by Robert Rauschenberg, which combines a painting and a found object—in this case, a stuffed bald eagle. Because it’s a federal felony to sell the bird in any form, the estate and their three appraisers claim the piece has zero value, in effect applying a 100% discount for lack of marketability to property that’s impossible or just plain illegal to sell. The IRS, however, is claiming the famous combination is worth closer to $65 million. (This summary post gets the most points for creative headlining—and a possible creative solution.)
Linda Trugman (Trugman Valuation) has been following the intriguing case, too. Although she believes the case is likely to settle before it ever gets to court, it certainly raises interesting issues related to the “definition of fair market value and the appropriateness of a DLOM,” she says. We’d love to see the IRS take the case to trial, too, not only to resolve the valuation questions but also the “is it art or is it a crime?” conundrum, so stay tuned...
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