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Isn’t art supposed to lift the human spirit?
You’ve probably read horror stories about family businesses sold to pay estate taxes.
Now Forbes magazine is reporting a strange case the IRS is pursuing against the estate of art dealer Ileana Sonnabend, who died in 2007.
Among the many works of art included in the estate is one called Canyon, a “sculptural combine” created by artist Robert Rauschenberg. According to Forbes, the IRS wants to value this particular piece at $65 million and collect some $29.2 million in estate taxes, plus $11.7 million in penalties.
Not the least of the problems facing Sonnabend’s heirs is that, if they sell Rauschenberg’s creation to pay the estate taxes, they will go to jail – along with any art connoisseur foolish enough to buy it! Both will have committed a felony.
It seems that this particular work of art includes within its composition a stuffed bald eagle. The 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty Act make it a crime to possess, sell, purchase, barter, transport, import or export any bald eagle – dead or alive.
Apparently, Sonnabend had received some sort of informal exemption from the United States Fish and Wildlife Service allowing her to possess Canyon. The artist himself had to send a notarized statement attesting that the eagle had been killed and stuffed by one of Teddy Roosevelt’s Rough Riders long before the 1940 act went into effect. The government then allowed Sonnabend to retain ownership of the work so long as it remained on exhibit in a public museum.
The Sonnabend estate used the IRS’s own valuation guidelines: the amount at which the item would change hands between a willing buyer and a willing seller, both fully knowledgeable of all relevant facts. Since Canyon cannot be legally sold, the estate valued the work at zero. The estate even hired three appraisers, including the auction house Christie’s, to support its zero valuation.
In prior cases, the IRS has successfully argued that assets like farmland should be valued at “highest and best use,” such as commercial development instead of growing corn. But this may be the first time the IRS has proposed that highest and best use is an illegal activity – like arguing that farmland could be cultivated for marijuana plants.
“Only put off until tomorrow what you are willing to die having left undone.” – Pablo Picasso
The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.
© 2012, CPAmerica International. All Rights Reserved.