Statements of value for art transfers.Statements of Value for Art Transfers One of the major issues involved with any gift, in the context of income, estate or gift taxes, is the value of the transfer. This can be especially troublesome when dealing with a work of art, since its value may be subjective, leading to disagreement between a taxpayer and the Internal Revenue Service. To provide some degree of certainty in these situations, the service has come up with a procedure taxpayers can use to have the value of works of art determined early in the process to avoid later arguments and questions if the service decides to examine the transfer. DEFINITION "Art" includes paintings, sculpture, watercolors, prints, drawings, ceramics, antique furniture Antique furniture is the term for collectible interior furnishings of considerable age; often its age, rarity, condition, utility, or other unique features makes the furniture desirable. , decorative arts decorative arts, term referring to a variety of applied visual arts, both two- and three-dimensional, including textiles, metalwork, ceramics, books, and woodwork, as well as to certain aspects of architecture (see ornament), public buildings, and private houses (see , textiles, carpets, silver, rare manuscripts, historic memorabilia mem·o·ra·bil·i·a pl.n. 1. Objects valued for their connection with historical events, culture, or entertainment: posters, publicity photographs, and other movie memorabilia. 2. and other similar objects. $50,000 threshold. This procedure is available only for transfers that involve an artwork that has been appraised at $50,000 or more. STATEMENT OF VALUE A taxpayer must submit a request for a statement of value before filing the return that first reports the transfer. The request must include * A copy of an appraisal. * A check for the $2,500 user fee. * For charitable contributions charitable contribution n. in taxation, a contribution to an organization which is officially created for charitable, religious, educational, scientific, artistic, literary, or other good works. , a completed appraisal summary (section B of Form 8283, "Noncash Charitable Contributions"). * The location of the Ilks district office that will have examination jurisdiction over the return. (This is not necessarily the service center where the return is filed.) This information will be provided by the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. when a request for a statement of value is submitted. Note: A taxpayer may withdraw this request at any time before the statement of value is issued by the IlkS. The user fee will not be returned. APPRAISALS A proper appraisal must include * A complete description of the item, including the name of the artist or culture; the title or subject matter; the medium (such as oil on canvas or watercolor on paper); the date created; the size; any distinguishing marks, signatures or labels on the item, including its back or frame; its history, including any available proof of authenticity The correct attribution of origin such as the authorship of an e-mail message or the correct description of information such as a data field that is properly named. Authenticity is one of the six fundamental components of information security (see Parkerian Hexad). ; any reference source citing the item; and its physical condition. * A professional-quality photograph of the item. * The specific basis for the valuation. * A statement that the appraisal is done for estate or gift tax purposes--if appropriate--the date on which the appraisal was done and the appraised fair market value. The appraisal must be made no earlier than 60 days before the date of the transfer. In addition, taxpayers are encouraged to include any additional information that may affect the determination of the work of art's fair market value. The appraisal must be prepared, signed and dated by a qualified appraiser A person selected or appointed by a competent authority or an interested party to evaluate the financial worth of property. Appraisers are frequently appointed in probate and condemnation proceedings and are also used by banks and real estate concerns to determine the market who performs appraisals on a regular basis, is not a party to the transaction, is not the beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. or donee The recipient of a gift. An individual to whom a power of appointment is conveyed. donee n. a person or entity receiving an outright gift or donation. DONEE. of the work of art and is not related (by employment, marriage or otherwise) to anyone involved in the transaction. In addition, this statement should describe the appraiser's qualifications, including background, experience, education and memberships in any appraisal organizations. Also, the appraisal fee may not be based on the appraised value An appraised value (USA) or mortgage valuation (Australia) pertains to the assessed value of real property in the opinion of a qualified appraiser or valuer. It is usually used as a pre-qualification & risk-based pricing factor related to the issuance of mortgage loans by a of the work of art. Attachment to return. If the service agrees with the value reported on the taxpayer's appraisal, it will issue a statement of value approving it. If the IRS disagrees with the value reported, it will issue a statement of value with its own determination of value and the basis for its disagreement with the taxpayer's appraisal. A copy of the statement of value, regardless of whether the taxpayer agrees with it, must be attached to and filed with the taxpayer's return that reports the transfer. Ifa taxpayer disagrees with a statement of value issued by the IRS, he or she may submit additional information in support of a different value. For a discussion of statements of value and other current developments, see the Tax Clinic, edited by Glenn Mackles, in the March 1996 issue of The Tax Adviser. Editor's Note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. The material discussed provides general information. Before you take any action in this area, the appropriate code sections, regulations, cases and rulings should be examined. --Nicholas Fiore, editor The Tax Adviser |
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