Art may have no rules, but the Internal Revenue Service does, and some of those rules are about works of art. For example, when you donate or bequeath art, you generally need to determine the fair market value of the art. You might also need to value art when claiming a theft or casualty loss. For these tax-related events, a qualified appraisal will help establish value.
What happens when the IRS has questions about your valuation, say in the course of an audit?
If your appraisal has valued the art at $50,000 or more, the IRS will call in the Art Appraisal Services unit. The appraisers in the unit research public information about the art, and also get assistance from a group of volunteers known as the Art Advisory Panel. These volunteers are dealers, scholars, and museum curators, and they meet twice a year to review the art in question and provide a consensus on the value.
Though meetings of the Art Advisory Panel are closed to the public due to internal revenue code privacy and nondisclosure rules, the IRS issues an annual summary report on the panel’s activities. The latest report is for fiscal year 2015. Here are questions taken from the information in the report.
How many items of art do you think the panel reviewed during fiscal year 2015?
Of the art items reviewed by the panel, what total value do you think the taxpayers claimed?
Of the art items reviewed by the panel, 35% were accepted at the value claimed by the taxpayer. What percentage do you think were increased in value by the panel?
How many taxpayer cases do you think the panel reviewed in fiscal year 2015?
This information should not be considered legal, investment or tax advice. Taxing Lessons and Top Drawer Ink Corp. do not provide legal, investment or tax advice. Always consult your legal, investment and/or tax advisor regarding your personal situation.