View Full Version : If you can't sell something...what is it worth?
And these are the same folks that are going to be responsible for ensuring everyone is in compliance with Nobamacare...
Heirs of a wealthy New York art dealer were left a $65 million sculpture that might just be more trouble than its worth.
Illeana Sonnabend, who died in 2007, left an art collection worth an estimated $1 billion. But one item in particular, Robert Rauschenberg's “Canyon,” is an heir's nightmare, a lawyer's dream and an IRS conundrum. The bequest comes with a $29 million tax bill, but since the piece includes a stuffed eagle, it can't be sold.
Read more: Pair inherits $65M sculpture, but can't sell it to pay $29M tax bill | Fox News (http://www.foxnews.com/us/2012/07/24/irs-art-collection-heirs-hope-to-settle-bizarre-tax-dispute-over-canyon-collage/#ixzz21aeFxa1y)
Placing a value on an item that cannot be sold is no easy feat. The venerable auction house Christie’s placed the value of "Canyon" at zero. The IRS initially put it at $15 million, then jumped the figure to $65 million when Sundell and Homem refused to pay, according to The New York Times.
The IRS, which declined to comment on the matter, is not only asking for $29 million in taxes, but also an $11.7 million “gross valuation misstatement” penalty, according to Forbes.
So when you disagree with the IRS...they simply quadruple the valuation of something you can't sell. Brilliant!
MrPeabody
07-24-2012, 7:40pm
I think they can win this one in court.
Why is the IRS still in business?
ConstantChange
07-24-2012, 8:00pm
That's unbelievable. Hopefully there is more to the story.
Like Christie's said, if you can't sell it, it's worth $0.00.
What is something worth if you can't sell it? Sounds like joebuck's virginity
Mirroredshades
07-24-2012, 8:29pm
Bupkiss.
:)
That's unbelievable. Hopefully there is more to the story.
Like Christie's said, if you can't sell it, it's worth $0.00.
:iagree: Something is only monetarily worth what someone will pay for it. Sentimental worth is something completely different, though. I have plenty of things that are worthless to anyone except me :yesnod:
mrvette
07-24-2012, 8:50pm
Screw the .gov, take the eagle off, pack it up and send overseas, like Japan/somewhere that don't give a shit, then send the eagle over in luggage....
done deal.....:seasix::hurray:
Going to be interesting when it goes to court. I agree if you can not sell it the value is $0.00, but on the other hand it has a value as art because people will pay to see it (don't ask me why you would pay to see this thing though).
99 pewtercoupe
07-24-2012, 10:02pm
They need to find out when the art work was created. If it was before the laws about Bald Eagles came into effect then it is grandfathered just like objects containing ivory elephants or scrimshaw from whales
They should just donate it to a well known art museum and take the $65 million as a tax write off.
SubZero
07-24-2012, 11:06pm
They should just donate it to a well known art museum and take the $65 million as a tax write off.
:iagree:
kylebuck
07-24-2012, 11:25pm
They should just donate it to a well known art museum and take the $65 million as a tax write off.
:iagree:
Kevin_73
07-24-2012, 11:25pm
Why is the IRS still in business?
No competition. They have a complete monopoly on legal intimidation, legal extortion, and legally taking money from the pockets of US citizens.
Burnt C6
07-25-2012, 6:56am
they can also Make a $$$$ mistake on your tax return and cause you major greef for years to come. The only difference between the IRS and the NAZI SS is the SS dressed in better uniforms
They should just donate it to a well known art museum and take the $65 million as a tax write off.
Guaranteed the IRS would immediately say it has no monetary value :rofl:
Mike Mercury
07-25-2012, 7:55am
Why is the IRS still in business?
they are needed to take from the producers - and hand the money back out to other people... in an attempt to purchase votes for the next election.
Cybercowboy
07-25-2012, 8:47am
I think they can win this one in court.
See, here's the problem. Private citizens are at a distinct disadvantage when they have to face off against the Feds in court. They have to pay their legal fees with real money. The Feds don't care about that trivial little thing. They can drag it out for years and bankrupt your ass long before a verdict is found. And even if you do eventually "win", good luck on being made whole again.
This is why us citizens really need to get familiarized with tar, feathers, and pitchforks again.
http://rlv.zcache.com/tar_feathers_pitchforks_cleaning_out_wash_dc_button-p145367938308295062en872_210.jpg
Bucwheat
07-25-2012, 9:22am
FairTax.org
This kind of media BS drives me nuts. The art panel is composed of museum curators and art professionals. Their sole job is to determine the value of a piece of art. They do not look at restrictions on marketability, etc., which are solely the province of the IRS Chief Counsel office.
The problem that nobody understands is that the estate tax is the only tax that cannot have its statute of limitations extended. The IRS must assess a deficiency within three years of the filing of the estate tax return. In any other case, the IRS and the taxpayer will execute a Form 872 and extend the statute of limitations allowing another year or two for them to reach an agreement. The estate tax assessment period can't be extended even if the IRS, even if the taxpayer and the beneficiaries want to extend it and would agree in writing to do so.
In a complex estate like this, it is very common for unagreed issues. When you consider it probably took the art panel 18 months to opine on the value in the first place, the IRS has very little time to act. To protect their interest, they always assess estate tax at the moon right before the three-year statute expires -- they can always agree to reduce the assessment later, but once assessed they cannot increase it.
It is doubtful that the estate will pay any tax at all on this particular piece. There are likely 20-30 unagreed valuation issues and the IRS will trade this one down to zero in exchange for another valuation going their way. (hrug). It's the way it works.
Cybercowboy
07-25-2012, 11:54am
(hrug). It's the way it works.
Tar.
Feathers.
Torqaholic
07-25-2012, 11:59am
American natives can use eagles. We have an indian casino here call "Soaring Eagle". They'd have no problem paying that kind of money, give them a call.
lander
07-25-2012, 12:24pm
This kind of media BS drives me nuts. The art panel is composed of museum curators and art professionals. Their sole job is to determine the value of a piece of art. They do not look at restrictions on marketability, etc., which are solely the province of the IRS Chief Counsel office.
The problem that nobody understands is that the estate tax is the only tax that cannot have its statute of limitations extended. The IRS must assess a deficiency within three years of the filing of the estate tax return. In any other case, the IRS and the taxpayer will execute a Form 872 and extend the statute of limitations allowing another year or two for them to reach an agreement. The estate tax assessment period can't be extended even if the IRS, even if the taxpayer and the beneficiaries want to extend it and would agree in writing to do so.
In a complex estate like this, it is very common for unagreed issues. When you consider it probably took the art panel 18 months to opine on the value in the first place, the IRS has very little time to act. To protect their interest, they always assess estate tax at the moon right before the three-year statute expires -- they can always agree to reduce the assessment later, but once assessed they cannot increase it.
It is doubtful that the estate will pay any tax at all on this particular piece. There are likely 20-30 unagreed valuation issues and the IRS will trade this one down to zero in exchange for another valuation going their way. (hrug). It's the way it works.
The IRS is not bound to the valuation provided by the Art Advisory Panel, and in fact initally indicated to the heirs that this piece of art would be valued at $15 million. Only after the heirs provided three separate appraisal's (Including Christie's) putting it's value at $0 since it could not be sold did the IRS put forth the Art panel's assessment of $65 million.
They've already paid over $400 million in taxes on the estate...I think all of the .gov's involved have taken enough for services not rendered.
mrvette
07-25-2012, 12:59pm
See, here's the problem. Private citizens are at a distinct disadvantage when they have to face off against the Feds in court. They have to pay their legal fees with real money. The Feds don't care about that trivial little thing. They can drag it out for years and bankrupt your ass long before a verdict is found. And even if you do eventually "win", good luck on being made whole again.
This is why us citizens really need to get familiarized with tar, feathers, and pitchforks again.
Like the 'justice' I got here in Florida in the CJ court and civil suits, and then chasing crooks through BK court.....whole thing should have been over in 4 months, the MOST.....all the rest of wasted time was acting against me and the .gov damn well knew it.....and the judge was paid off......
.gov can go to HELL, from top down to local school.....
:issues::sadangel::shots:
The IRS is not bound to the valuation provided by the Art Advisory Panel, and in fact initally indicated to the heirs that this piece of art would be valued at $15 million. Only after the heirs provided three separate appraisal's (Including Christie's) putting it's value at $0 since it could not be sold did the IRS put forth the Art panel's assessment of $65 million.
1) At this level, the IRS is, in fact, bound to the decision of the Art Panel. Once the Art panel renders its decision, this becomes the official position of the IRS and field agents cannot deviate from it without the consent of the Chief of the IRS' Art Appraisal Services (IRM 8.18.1.3.3 and 4.48.2.4). Chief Counsel can deviate, but in an estate this large, you won't get agreement on all of the issues in time and so this piece of art will go unagreed (for the time being) also.
2) The Service has had tremendous success in having the Art Panel's valuations upheld in the Courts and they would be foolish to start deviating from that now inasmuch as doing so calls into question the Art Panel's conclusions. I've had several hundred pieces go before the Art Panel, if not more. Some were increased, some decreased, but most stayed the same. I have never gotten the IRS to concede a value different than the Art Panel's recommendation. What they have done instead is give concessions on other "fuzzier" areas, such as the value of a controlling block of stock or a closely held business such that it all comes out in the wash.
3) The piece was returned at zero based upon the appraisals. Therefore, it would not have been an Art Panel's radar at the outset (i.e, under $20,000), but would have been referred to them later. During that time, the Service can have discussions with the taxpayer about potential agreed values, but once the Art Panel's recommendations are issued, you're screwed. In this case, the $15 million likely came from an independent appraiser they consulted who took into account the problem regarding the taxpayer's ability to sell. The art panel would be aware of none of this and wouldn't consider such an issue.
Again, just because it's assessed at $65 million doesn't mean that's final - not by a long shot. It's just that the Art Panel appraises art, not valuation discounts.
They've already paid over $400 million in taxes on the estate...I think all of the .gov's involved have taken enough for services not rendered.
{Shrug}. I'm just telling you how it works. Whether you agree with the estate tax or not, that sculpture has some value and is subject to tax. The only question is how much -- and that is completely different question from the "haven't you taken enough already" meausring stick you are using. If ypu want to provide relief to taxpayers at this level, then ask your Congressman to pass a new law capping the estate tax to estates of under $1 billion. Then when the .gov collects it's first $400M, it wouldn't have any incentive to pursue cases like this.
Not disagreeing with any of that...but there is precedent that the IRS goes against the valuation by the Art Panel and do it in a percentage of the valuations every year.
Unfortunately what I haven't been able to discern from any of the articles is the timeline of events so that we can get a better idea of how long between each valuation from the IRS occured. If there was a delay between the original $15m and the final $65m, then it's one thing...but if that time frame was very narrow, then it comes across as a knee jerk reaction.
The really offensive part is the penalty from the IRS trying to insinuate that the heirs were doing something unlawful. In fact, the heirs have been very careful to follow the law and went as far as providing three separate valuations of $0 based upon the fact that they can't sell it, so the value to them is, in fact, nothing. It may be very well worth $65 million if it could be sold, but it can't (even though it was obtained legally and prior to any laws making it illegal to possess, they have all the paperwork proving it's legal for them to own, from the government no less).
Do I think the death tax is ludicrous? Absolutely...but wtf, it makes lawyers millions and millions of dollars every year, so trying to get rid of it would be futile at best.
They should just donate it to a well known art museum and take the $65 million as a tax write off.
You'd still lose. The taxpayer died in 2007. Estate tax rates were 45 or 46% back then. Your charitable deduction will be at least 10% lower and is then subject to AGI and carryover limitations.
See, here's the problem. Private citizens are at a distinct disadvantage when they have to face off against the Feds in court. They have to pay their legal fees with real money. The Feds don't care about that trivial little thing. They can drag it out for years and bankrupt your ass long before a verdict is found. And even if you do eventually "win", good luck on being made whole again.
This is why us citizens really need to get familiarized with tar, feathers, and pitchforks again.
This is balanced by the fact that the IRS attorneys are generally of a lesser skill level. And you're not going to bankrupt this family fighting over a couple million dollars. Theyve got the jack and the fees are deductible against the estate tax. Thus, every dollar that is spent fighting this issue by the taxpayer is a dollar less in the estate that is being taxed (at 45-46%). For example, if the IRS seeks to increase the value of a piece of artwork by $1 million and the taxpayer spends $1 million defending it, the IRS gets nothing even if they win. IF they lose, the 'gov effectively pays 45% of the legal bill and the taxpayer pays 55%. These laws were written by attorneys, after all.
Not disagreeing with any of that...but there is precedent that the IRS goes against the valuation by the Art Panel and do it in a percentage of the valuations every year.
Unfortunately what I haven't been able to discern from any of the articles is the timeline of events so that we can get a better idea of how long between each valuation from the IRS occured. If there was a delay between the original $15m and the final $65m, then it's one thing...but if that time frame was very narrow, then it comes across as a knee jerk reaction.
The really offensive part is the penalty from the IRS trying to insinuate that the heirs were doing something unlawful. In fact, the heirs have been very careful to follow the law and went as far as providing three separate valuations of $0 based upon the fact that they can't sell it, so the value to them is, in fact, nothing. It may be very well worth $65 million if it could be sold, but it can't (even though it was obtained legally and prior to any laws making it illegal to possess, they have all the paperwork proving it's legal for them to own, from the government no less).
Do I think the death tax is ludicrous? Absolutely...but wtf, it makes lawyers millions and millions of dollars every year, so trying to get rid of it would be futile at best.
I don't know how much time passed between the $15M and the $65M, but I guarantee they were independent events. The Art Panel does not know the identity of the taxpayer unless a piece is so prominent that everyone knows who owns it. The Panel meets only twice a year as I recall, and the artwork from varius taxpayers is randomly shuffled. Moreover, certain Panel members are experts in certain areas, so not one person or body of people knows the whole picture. Until they are done and their report it issued, nobody has a clue what they are going to do.
I've not seen anything that suggests the IRS is trying to paint the heirs as doing something unlawful. In fact, every article I've read makes the Service out to be a bunch of greedy morons. If I had a qualified Christies appraisal that said $0, hell, I'd return the thing at zero too. A taxpayer's return is an admission against interest and you can't return a piece at $1 million and later come back and say you were too high in your first estimate and it should only be $500,000. As a general rule, you can only go up from what you put on a return.
island14
07-26-2012, 12:33am
Guaranteed the IRS would immediately say it has no monetary value :rofl:
:yesnod:
Count on that! :toetap:
JMS32935
07-26-2012, 1:01am
Here's a picture of the beastie, FYI...
http://upload.wikimedia.org/wikipedia/en/7/74/Robert_Rauschenberg%27s_%27Canyon%27%2C_1959.jpg
From... Robert Rauschenberg's 'Canyon', 1959.jpg (http://en.wikipedia.org/wiki/File:Robert_Rauschenberg%27s_%27Canyon%27,_1959.jpg) , which says it's at the National Gallery of Art in Washington, D. C.
If they were so inclined, seems they could just donate it to that institution. Seeing as they haven't done that already, seems they must want to keep it. Or so it seems.
Info about the artist, FYI... Robert Rauschenberg - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Robert_Rauschenberg)
Torqaholic
07-26-2012, 5:52am
Easy to see why they valued it at zero :rofl:
Easy to see why they valued it at zero :rofl:
It is definitely the epitome of "Beauty is in the eye of the beholder"!
The unfortunate circumstance here is that the heirs could, if they so desired, remove the eagle from the piece and destroy it, and then have the work revalued and then be able to sell it. Or, they could take it out to the BBQ and burn the whole damn thing and all would be ok again for them regarding this piece.
mrvette
07-26-2012, 6:56am
Easy to see why they valued it at zero :rofl:
Got THAT right, what passes for 'art' is just flat stooooopid, shit like PicASSo, all the weird shit......
who in hell they trying to kid....??
:lol:
If they were so inclined, seems they could just donate it to that institution. Seeing as they haven't done that already, seems they must want to keep it. Or so it seems.
Unfortunately, you won't break even because the value of the income tax deduction is less than the estate tax you would pay, the income tax deduction is subject to AGI limitations and any carry-over (year of gift plus five years) means you have to factor the time value of the deduction in.
The unfortunate circumstance here is that the heirs could, if they so desired, remove the eagle from the piece and destroy it, and then have the work revalued and then be able to sell it. Or, they could take it out to the BBQ and burn the whole damn thing and all would be ok again for them regarding this piece.
That wouldn't change the fact that the piece was intact on date of death. Whether the value is $1, $15 million or $65 million, they would still owe estate tax on the value of the piece at date of death. Prying off the Eagle might make it saleable, but it won't affect the date of death determination as to value. Subsequent events can't be considered.
lander
07-26-2012, 10:14am
My statement regarding removing the eagle was straight from the Forbes article from an expert tax attorney (I believe) indicating this was one of their existing options. Unfortunately I have to head out so I don't have time to verify, but it's in a link to the story I linked to in my OP.
My statement regarding removing the eagle was straight from the Forbes article from an expert tax attorney (I believe) indicating this was one of their existing options. Unfortunately I have to head out so I don't have time to verify, but it's in a link to the story I linked to in my OP.
Oh, it's an option to make it legal to sell. And if the heirs of the original decedent are ill or getting on in years, they risk dying themselves and having the exact same problem. But it won't change the value at date of death in the first (mom's 2007) estate.
Assuming the IRS wins (and I'm not saying this will be the result, because I think the taxpayer should win here), the estate owes $29 million in estate tax and your choices are basically as follows:
1) Contribute the thing to charity and get about a $23 million tax benefit back (subject to AGI limits and the 5 year charitable deduction carry-forward rules), leaving you about $6 million in the hole; or
2) Pry off the eagle and try to sell it for more than $23 million, and ideally more than $29 million. Even though your basis is $65 million, the incremental loss is non-deductible, although you could sell some other collectibles a gain and net the two in the year or sale, but otherwise the loss is non-deductible.
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