What is the value of a piece of art that cannot be sold? In the case of "Canyon" by artist Robert Rauschenberg, the IRS claims it is worth $65 million. They also want to tax the heirs who now own the artwork over $29 million.
Last week I had the privilege of appearing on Fox News to discuss the dilemma that taxpayers can face when estate planning basics are overlooked. Click on the image below to watch.
All personal and business assets are subject to an estate tax based on fair market value at the date of death. In this case, deceased art owner Ileana Sonnabend knew that the Canyon artwork she held could not be sold because it prominently features a bald eagle. She had acquired a special permit to continue owning the artwork, but failed to transfer it out of her estate through a charitable donation prior to her death.
Read the New York Times Coverage
Here is an excerpt from a New York Times article on the story.
Because the work, a sculptural combine, 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 Internal Revenue Service 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 I.R.S. in the hope of finding a resolution.