So you have there is this really cool
painting that you gave away. Do you want
it to be worth a lot or a little? It depends on who you gave it to.
Giving someone art rather than
dollars can be complicated, especially when it comes to taxes and the IRS. So
the need for a qualified appraisal is critical in this gifting situation.
When it comes to art valuations,
however, you should know that the IRS certainly will not take your word for it,
or even the word of a decent appraiser, until they get their own expert opinion
from their own experts: the Art Advisory
Panel. A fair question to ask, then, is how fair is the Art Advisory Panel?
The question of the Panel and
fairness was addressed in a recent Forbes
article titled “Is Art Advisory Panel Giving Taxpayers A
Fair Shake?” Here’s how the competing interests play out. First, if you
are a taxpayer giving art to a loved one or bequeathing it as a part of your
estate, then you likely want a lower valuation. Why? Because you want a lower
tax bill. On the other hand, if you are selling that very same piece of art,
then you will want to command the absolute top dollar. Likewise, a body in
charge of taxation is pretty much always going to be interested in a high
valuation because it triggers a higher tax bill.
So, statistically, how much of
taxpayer appraisals does the government Panel accept? Would you believe only
51%? In addition, the Panel “adjusts” the other 49%, and of that adjusted
percentage generates a net 47% increase on items in estate and gift appraisals.
Of whom are you more cynical,
the IRS or the taxpayer?
When considering the gift of
art, be sure to have your valuation set and ready to go. Remember: there’s
nothing an expert likes better than disagreeing with another expert – and the
IRS keeps them on staff.
Reference: Forbes
(February 6, 2013) “Is Art Advisory Panel Giving Taxpayers A Fair
Shake?”