A Wilmington NC CPA discusses art valuation for the IRS. If you'd like a free initial consult, please call us at (910) 399-2705.
The IRS states that in 2006, individual tax payers claimed itemized deductions (for charitable giving) on 147,896 items of art valued at $1.22 Billion. That’s a lot of art work and these stats don’t include works of art valued in Estates. Sometimes, the issues are straight forward and analogous to donating a used arm chair to Good Will: donate art to the Cameron Museum (we’re lucky in Wilmington, NC), obtain a receipt with a value, and then claim the deduction on Schedule A of your taxes. But it can get complicated fast.
As a CPA, I have no expertise on art. But the IRS does. It maintains the IRS Art Advisory Panel, which automatically reviews tax payer claims of art of $20,000 or more, on both Form 1040 and Form 1041 (Estate returns). As you might expect, in 2008, this panel adjusted the value UPWARDS in 91% of estate and gift cases. Your CPA can request a pre-determination of the value the IRS will accept through a process similar to Private Letter Rulings (where taxpayers can obtain a personal IRS pre-determination on anticipated tax strategies), if the claimed value of the art work is expected to be more than $50,000. Watch out, because the IRS fee will be at least $2500! Remember timing of the appraisal is critical too. If part of your Estate planning includes charitable giving, with works of art, today’s figure may not be appropriate and estimates of its future value should be factored into the calculations.
“Obviously, an appraisal is prudent when you have art that needs a valuation for tax purposes. “
Gary Bode, Wilmington NC CPA and tax accountant
Note that appraisers are subject to fines of at least $1000 if they come down on the wrong side of the IRS. Common issues in art valuation are market volatility, authenticity, true ownership, and blockage discounts.
If you need a free initial consult, please consider calling Gary L. Bode, MSA, CPA, PC at (910) 399-2705.
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