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Financial Planning / Tax Strategies
|Subject: Interesting tax case||Date: 7/29/2012 1:20 PM|
|Author: fleg9bo||Number: 116460 of 121335|
What is the fair market value of an object that cannot be sold? The question... is one that lawyers for the heirs of the New York art dealer Ileana Sonnabend and the Internal Revenue Service are set to debate when they meet in Washington next month.
The object under discussion is "Canyon," a masterwork of 20th-century art created by Robert Rauschenberg that Mrs. Sonnabend's children inherited when she died in 2007. Because the work includes a stuffed bald eagle, a bird under federal protection, the heirs would be committing a felony if they ever tried to sell it. So their appraisers have valued the work at zero.
But the IRS takes a different view. It has appraised "Canyon" at $65 million and is demanding that the owners pay $29.2 million in taxes. "It's hard for me to see how this could be valued this way because it's illegal to sell it," said Patti S. Spencer, a lawyer who specializes in trusts and estates but has no role in the case. The family is now challenging the judgment in tax court and its lawyers are negotiating with the IRS in the hope of finding a resolution.
The work is on a long-term loan to a major museum in NYC. Why don't the heirs just donate it and take the charitable deduction to offset the tax? Because given their income and the limits on deductions, they would only be able to deduct a small part of it each year, still leaving them with a huge tax bill.
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