The IRS has been getting its share of bad press of late. [Understatement] However, one positive is the Service seems to know what is in its wheelhouse – and what is not. The IRS knows taxes, but looks to outside experts when it comes to valuing art.
When it comes to taxation, no one likes surprises.
The Art Advisory Panel is, in the history of the tax code, a fairly new invention dating back to 1968. Despite its relatively recent existence, the influence of the Art Advisory Panel has only increased over the intervening decades as the value of art itself has skyrocketed.
The Wall Street Journal recently provided an introduction to the Panel in an article titled “The Art (Tax) Police.”
Practically speaking, the value of art is ambiguous at best, and yet it is also very real. Just because you regard a painting as “priceless,” some potential purchaser just might give you, your estate, or your heirs a very definite and taxable price for it.
The Art Advisory Panel exists to double-check your numbers on the real-world taxable value of the artwork for the purposes of the assessment of taxes or even charitable deductions. Consequently, the Panel truly is the tax police of the art world, scrutinizing any piece of art assigned a value of more than $50,000.
Happily, the Panel finds in favor of the taxpayer about half of the time. Unhappily, those taxpayers on the losing end find themselves stuck with a larger than anticipated tax bill and, perhaps, penalties.
When it comes to the valuation of art, it is worth your time to get a qualified appraisal so you are well-prepared if the IRS calls in the art (tax) police.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: The Wall Street Journal (September 20, 2013) “The Art (Tax) Police”