If a piece of art cannot be legally sold, how can it have a value? In the drug world, those items which are possessed and cannot be legally sold (heroin for example) are confiscated by the government. In the art world, it seems an item which is possessed and cannot be legally sold (because it contains a stuffed bald eagle) is taxed by the government.
A couple who are the heirs of an art collection estimated at $1 billion, are the new proud owners of a sculpture by Robert Rauschenberg called "Canyon." The sculpture is widely regarded as a masterwork of 20th century art and it contains a stuffed bald eagle.
The problem is that there is a federal law which makes it a crime to possess, transport, sell or otherwise convey a bald eagle - alive or dead. The artist got a waiver allowing him to use the stuffed bird, because it was stuffed prior to the creation of the law. The last owner also got a waiver allowing her to continue to own it. The problem comes with the transfer of property.
The brother and sister who inherited the $1 billion art collection stands to pay 50 percent in inheritance tax if the so-called Bush tax cuts expire. They'd like to pay the inheritance taxes now, although the valuation of the "Canyon" sculpture is problematic.
Because it cannot be sold legally, the famous auction house Christies put the value at zero. The IRS initially valued the piece at $15 million but then raised it to $65 million when the new owners disputed the valuation.
Today the IRS is seeking $29 million as the inheritance tax plus an additional $11.7 million penalty for a gross valuation misstatement. This IRS tax dispute is likely to be settled by a jury. Perhaps the couple would be happy to let the government confiscate the sculpture.
Source: Fox News, "Pair inherits $65M sculpture, but can't sell it to pay $29M tax bill," July 24, 2012
Our Twin Cities law firm represents clients with IRS disputes and other tax matters similar to those described in this post.