Giving things rather than dollars can be tricky, especially come tax time. Consequently, you really need a qualified appraisal on board to make it all work. When it comes to art valuations, however, you should know that the IRS certainly will not take your word for it, or even the word of a decent appraiser, until they get their own expert opinion from their own experts: the Art Advisory Panel. A fair question to ask, then, is how fair is the Art Advisory Panel? The question of the Panel and fairness was addressed in a recent Forbes article titled “Is Art Advisory Panel Giving Taxpayers A Fair Shake?” Here’s how the competing interests play out. First, if you are a taxpayer giving art to a loved one or bequeathing it as a part of your estate, then you likely want a lower valuation. Why? Because you want a lower tax bill. On the other hand, if you are selling that very same piece of art, then you will want to command the absolute top dollar. Likewise, a body in charge of taxation is pretty much always going to be interested in a high valuation because it triggers a higher tax bill. So, statistically, how much of taxpayer appraisals does the government Panel accept? Would you believe only 51%? In addition, the Panel “adjusts” the other 49%, and of that adjusted percentage generates a net 47% increase on items in estate and gift appraisals. Of whom are you more cynical, the IRS or the taxpayer? The takeaway is that any gift of art is something to be fully considered with your valuation ducks in a row. Remember: there’s nothing an expert likes better than disagreeing with another expert - and the IRS keeps them on staff.
(February 6, 2013) “Is Art Advisory Panel Giving Taxpayers A
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