The purpose of the panel meetings is to discuss and make recommendations regarding the acceptability of taxpayers’ appraisals of works-of-art. If the Panel recommends rejection of a taxpayer’s appraisal, it may also recommend a different valuation, the securing of additional information or consultation with a specialist.
Beauty of art may be in the eye of the beholder, but the value is in the calculations of the appraiser. And when dealing with the IRS’s Art Advisory Panel, you’ll want to make sure those valuations are accepted.
A recent article on WealthManagement.com titled “Charitable Gifts of Artworks Part 2” follows on the heels of part 1 of the same article and gets into the nuts and bolts of art valuations. At the outset, it is valuable to know that the Panel exists, but it is essential that you know in advance how to plan for it.
You see, since the value of anything is determined by the market for it (from gold to grain to stocks, and yes, art), you must prove the tax consequences to the IRS whenever you transfer ownership to any charity or other recipient.
Taxpayers by nature want a gift to charity to receive a higher value and a gift to a loved one to receive a lower value. The Art Advisory Panel is there to check your work, or the work of your appraiser, and be sure that the right taxes have been paid.
If you intend to give, whether to charity or others, then the Art Advisory Panel will need to be convinced of the value you set.
Reference: WealthManagement.com (August 26, 2013) “Charitable Gifts of Artworks Part 2”