NEWS & EVENTS
Elizabeth von Habsburg, Managing Director, Winston Art Group is quoted in “Distributing the cookies, wine and art” as a trusted source for independent appraisals. The article highlights the steps involved in properly planning for the legacy of your collection. Read on for Elizabeth’s insight!
APRIL 3, 2018
“Distributing the cookies, wine and art, Part II”
Article by KATJA ZIGERLIG
Donations require appraisals, too
Donations—and gifts of a certain value—require appraisals to substantiate the tax benefits. The Art Advisory Panel of the IRS reviews appraisals valued at more than $50,000 that taxpayers submit to support Fair Market Value claims involved with income, estate and gift tax returns. In 2016, the Panel reviewed 555 items, accepting 40% of the appraised values, and recommending value adjustments on the other 60%.
Elizabeth von Habsburg of the independent appraisal firm Winston Art Group illustrates the experience of a client. A museum director, seeing the work of a highly sought-after contemporary painter in a client’s residence, asked if the client, who was a trustee of the museum, might consider donating it. The client agreed immediately, and the work was donated using the full purchase price of $500,000 for valuation purposes. The IRS, reviewing the donation, questioned the value, which was submitted using the full purchase price.
The IRS rejected that Retail Replacement Value, and the client came to Winston in need of a Fair Market Value appraisal.
Why did they reject this value? Retail Replacement Value (in this example, the full purchase price) and Fair Market Value (the value required by the IRS for donations) are often two very distinct values. This difference is explained in my post on art appraisals and insurance. In this case, explains Elizabeth, the right consultation allowed the client to donate their artwork.
“Based on our research, the Fair Market Value was $150,000, and therefore the amount the client could claim as a deduction. The IRS accepted this value, and the client still had the prestige of contributing a stellar work to the museum and reducing their tax exposure.”
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